As part of the push for federal grant reform, the U.S. Office of Management and Budget (OMB) recently finalized changes to Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. The OMB released the changes in December 2013 in its guidelines, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (Uniform Grant Guidance).

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As part of the push for federal grant reform, the U.S.
Office of Management and Budget (OMB) recently
finalized changes to Circular A-133, Audits of States,
Local Governments, and Non-Profit Organizations.
The OMB released the changes in December 2013 in
its guidelines, “Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal
Awards” (Uniform Grant Guidance).
The changes reflect some of the most significant
reporting updates for organizations that receive federal
grants since the creation of the A-133 Single Audit.
Eight OMB Circulars, including A-133, have been
combined into one “super circular” that takes effect for
organizations beginning with December 31, 2015 year-ends.
Now considered Subpart F of the Uniform Grant
Guidance, A-133 requirements underwent a number
of changes to allow for more regulatory focus on
larger, riskier programs and organizations. Changes
to audit requirements accompanied these updates. A
more detailed explanation of some of these changes
follows. Organizations subject to A-133 requirements
should note the full list of updates to the OMB Circulars
and consider their impact on future audits.
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© 2014 Mayer Hoffman McCann P.C. 877-887-1090 • www.mhmcpa.com • All rights reserved.
June 2014
OMB Makes Sweeping Changes to A-133 Audit Requirements
Threshold for Single Audit
Perhaps the biggest change in the new guidelines
stems from the increased threshold requirements for
the Single Audit. To allow for more attention on the
larger, riskier organizations, OMB issued guidelines
that will reduce the number of organizations subject
to the audit requirement.
Under current regulations, state, local governments
and not-for-profit organizations that expend more than
$500,000 in federal grants per fiscal year are required
to undergo an A-133 audit. The new guidance raises
the minimum threshold to $750,000. As a result of the
threshold increase, an estimated 5,000 organizations
will no longer be subject to the audit requirement.
Risk Assessments
Type A/B Major Program Threshold
For risk assessment purposes, OMB Circular A-133
classifies major programs as Type A programs, which
are the larger programs, or as Type B, which are
programs on the smaller side. The newly released
guidance increases the Type A/B threshold from
$300,000 to $750,000 for organizations that spend
between $750,000 and $25 million in total federal
awards per fiscal year; with higher thresholds for higher
levels of Federal grant expenditures. This change may
reduce the number of programs considered major and
therefore fewer programs may require the audit.

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Other than decreasing the number of programs
classified as Type A, the change in the new guidelines
reflects a move toward more consistency. Circular
A-133’s Single Audit requirement threshold was
raised from $300,000 to $500,000 in 2004, but the
Type A/B threshold was not adjusted at that time. This
new threshold more closely resembles the threshold
change in the Single Audit requirement.
Type A/B Audit Requirements
Type A programs are required to undergo an audit if they
have not been audited or tested as a major program
in the past two audit cycles. The new guidelines also
dictate that programs will be considered high risk and
tested as a major program if:
• There was a material weakness identified in the
previous audit,
• There was a modified opinion on compliance, or
• If it is known or is likely that questioned costs
exceeded 5 percent of the programs funded by
federal grants.
This focus on areas with internal control deficiencies
could mean that entities with strong internal controls
and few audit findings could have fewer programs
audited.
Percentage of Coverage
Minimum coverage rules for the percentage of federal
awards that must be audited also changed under the
new Uniform Grant Guidance. For entities meeting the
low-risk criteria noted above, the percentage of audit
coverage dropped from 25 percent to 20 percent.
Entities not meeting the low-risk criteria now have a
percentage of audit coverage of 40 percent, which is
down from 50 percent in the current A-133 rules. The
lowered percentage-of-coverage requirements could
reduce the number of programs being audited.
Further Changes
For more information about the compliance
modifications, please see the 2014 OMB Circular
A-133 Compliance Supplement. We will keep you
up-to-date on any additional modifications to the
compliance requirements as they occur. In the
meantime, you may contact us with any questions or
concerns.
For More Information
MHM’s Professional Standards Group will keep you
up-to-date on the modified requirements.
If you have any specific questions, comments
or concerns, please contact Michelle Spriggs of
MHM’s Professional Standards Group or your MHM
service professional. You can reach Michelle at
mspriggs@cbiztofias.com or 774.206.8336.
The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation.
© 2014 Mayer Hoffman McCann P.C. 877-887-1090 • www.mhmcpa.com • All rights reserved.
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Please contact your MHM auditor to further discuss the impact on your audit or audit report.