The new Uniform Guidance (UG) provides detail of the audit requirements in Subsection F, part 200.500. The new audit requirements are not drastically different than the previous audit requirements; however there are some key elements that have changed and will have an impact on audits performed under the UG. This article will highlight those changes that will be effective for audits with December 31, 2015 year ends.
The first key difference is that the audit threshold has increased to $750,000. For entities that were previously required to have Single Audits under OMB Circular A-133 with federal expenditures between $500,000 and $750,000, compliance audits will no longer be applicable. Only those organizations with federal expenditures in excess of $750,000 will be required to have a Single Audit under UG.
Under both A-133 and UG, the auditor is required to use a risk assessment process to determine which federal programs will be audited in detail (treated as a major program). Under A-133, federal programs exceeding $300,000 of annual expenditures were required to be audited every third year and potentially more often depending on other risk factors. This threshold is now $750,000 under UG (unless total federal expenditures exceed $25 million). As a result, fewer programs may need to be audited under UG.
Another key difference as a result of the UG is the determination criteria related to qualifying as a low-risk auditee. The UG adds the requirement that the auditor cannot have reported substantial doubt about the entity’s ability to continue as a going concern in the prior two audit periods. In the previous A-133 requirements, going concern issues would not have precluded an entity from being considered a low-risk auditee. The other requirements to qualify as a low-risk auditee are essentially the same.
Whether an entity qualifies as a low-risk auditee determines how many federal programs are audited as a major program. Previously, auditors were required to obtain coverage of 50 percent of total federal expenditures for a high-risk auditee, and 25 percent coverage if an entity qualified as a low-risk auditee. Under the new UG, these percentages decrease to 40 percent and 20 percent audit coverage for high-risk and low-risk auditees, respectively.
The last change that auditees should be aware of is the reportable questioned costs threshold has increased. Auditors were previously required to include questioned costs over $10,000. This threshold has changed to $25,000. The auditor is required to report known (specifically identified) questioned costs greater than $25,000. Auditor’s must also report known questioned costs when likely questioned costs are greater than $25,000 for a compliance requirement of a program audited as a major program.
Additional detail of the audit requirements under the Uniform Guidance can be found at http://www.ecfr.gov and then selecting Title 2 – Grants and Agreements from the drop-down menu. From there, select Chapter 2, and then Part 200.500 for the auditing requirements. Please contact Traci Hanson, Shelley Goodrich, or Jeff Yennie if you have any questions.