OMB Circular A-133 Information Collection Under OMB Review

OFFICE OF MANAGEMENT AND BUDGET

OMB Circular A-133 Information Collection Under OMB Review

AGENCY: Office of Management and Budget.

ACTION: Notice.

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SUMMARY: In accordance with the Paperwork Reduction Act of 1980, as

amended (44 U.S.C. 3501 et seq.), this notice announces that an

information collection request was submitted to the Office of

Management and Budget's (OMB) Office of Information and Regulatory

Affairs for processing under 5 CFR 1320.10. The first notice of this

information collection request, as required by the Paperwork Reduction

Act, was published in the Federal Register on November 5, 1996 (61 FR

57232), as part of the proposed revision of OMB Circular A-133, re-

titled ``Audits of States, Local Governments, and Non-Profit

Organizations.''

The information collection request involves two proposed

information collections from two types of entities: (1) Reports from

auditors to auditees concerning audit results, audit findings, and

questioned costs; and, (2) reports from auditees to the Federal

Government providing information about the auditees, the awards they

administer, and the audit results. Circular A-133's information

collection requirements will apply to approximately 25,000 States,

local governments, and non-profit organizations on an annual basis.

DATES: Written comments must be received by July 30, 1997.

ADDRESSES: Written comments should be sent to: Edward Springer, Office

of Information and Regulatory Affairs, OMB, Room 10236, New Executive

Office Building, Washington, DC 20503. Electronic mail comments may be

submitted via the Internet to [email protected]

FOR FURTHER INFORMATION CONTACT: For further information, contact

Sheila Conley, Office of Federal Financial Management, OMB (telephone:

202-395-3993). The text of this Notice and the November 5, 1996,

Federal Register are available electronically on the OMB home page at

http://www.whitehouse.gov/WH/EOP/omb, under the caption ``Federal

Register Submissions.''

SUPPLEMENTARY INFORMATION:

A. Background

As part of the Single Audit Act Amendments of 1996 (1996

Amendments), Congress intended to improve the usefulness and

effectiveness of single audit reporting with respect to information

provided by both auditors and auditees. In its report on the 1996

Amendments, the House Committee on Government Reform and Oversight

stated that ``the complexity of the reports makes it difficult for the

average reader to understand what has been audited and reported * * * A

summary of the audit results would highlight important information and

thus enable users to quickly discern the overall results of an audit''

(H.R. Report 104-607, page 18).

The revised information collection requirements included in the

proposed revision of Office of Management and Budget (OMB) Circular A-

133, re-titled ``Audits of States, Local Governments, and Non-Profit

Organizations,'' published in the November 5, 1996, Federal Register

notice (61 FR 57232), are intended to improve both the content of

single audit reports and the dissemination of information included

therein to various report users (e.g., Congress, Federal program

managers, pass-through entities). As indicated in the November 5, 1996,

Federal Register notice, OMB believes that the revised information

collection requirements included in the proposed revision of Circular

A-133 would result in significantly improved single audit reporting and

governmentwide data collection.

Circular A-133's information collection requirements will apply to

approximately 25,000 States, local governments, and non-profit

organizations on an annual basis. OMB's estimate of the total annual

reporting and recordkeeping burden that will result from this

information collection is presented in Table 1.

B. Public Comments and Responses

Pursuant to the November 5, 1996, Federal Register notice, OMB

received approximately 150 comments relating to this proposed

information collection. Letters came from Federal agencies (including

Offices of Inspectors General), State governments (including State

auditors), certified public

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accountants (CPAs), non-profit organizations (including colleges and

universities), professional organizations, and others. All comments

were considered in preparing OMB's responses presented below and in

developing the final revision to Circular A-133, which is published in

a companion Notice in this Part in today's Federal Register. The

comments received relating to the information collection and OMB's

responses are summarized below.

Estimates of Reporting Burden

Comments

In the preamble of the proposed revision, OMB stated that the

reporting burden per audit will increase from 26 hours under the

existing requirements of Circulars A-128, ``Audits of States and Local

Governments,'' and A-133, ``Audits of Institutions of Higher Education

and Other Non-Profit Institutions,'' to 34 hours under the proposed

revision. OMB stated that the increase in hours was due, in part, to

the new requirement to prepare the data collection form, which would

take four hours, if prepared by the auditee, and two hours, if prepared

by the auditor. Most commenters--primarily State auditors and CPAs--

stated that OMB's estimates regarding the preparation of the data

collection form are too low. Several State auditors commented that,

while the estimates may be appropriate for smaller States and local

governments, they are grossly understated for larger governments. Some

State auditors provided estimates to prepare the form for smaller

entities ranging from two to four hours but no estimates were provided

by State auditors to prepare the form for larger entities. One State

agency stated that ``For an audit the size and complexity of New York

State, the preparation and review of a data collection form would take

at least 15 hours and could take up to 40 hours. For smaller entities

where New York State serves as the pass-through entity, the estimates

range from 5 to 15 hours.'' One State auditor questioned how realistic

any time estimates can be until someone actually prepares the form. One

CPA commenter stated that ``OMB's estimate that auditor preparation of

the data collection form would take two hours appears to be low. Most

firms, including ours, have implemented policies that require reviews

of work performed and reports issued, whether involving formal reports

or preparation of government forms. Depending on the size and

complexity of an auditee, the preparation and review of a data

collection form could take anywhere from 5 to 15 hours.''

Response: Based on the comments received, OMB revised the reporting

burden and cost estimates, as presented in Table 1. Several

modifications were made in determining the revised estimates. First,

OMB estimated reporting burden hours and costs separately for large

auditees (i.e., auditees most likely to administer a large number of

Federal awards) and all other auditees. For estimation purposes, OMB

separately estimated burden for 200 large auditees, consisting of the

50 States, 50 largest counties and cities, and 100 largest non-profit

organizations (including colleges and universities). The reporting

burden for both auditees and auditors increases significantly for

entities that administer a large number of Federal awards because the

length of time required to prepare both the schedule of Federal awards

and the data collection form increase with the number of Federal awards

administered by the auditee. Second, the revised estimates reflect the

modified requirements included in the final revision to Circular A-133

whereby the auditor will prepare and sign sections of the data

collection form that relate to the audit results and Federal awards,

and the auditee will review and sign the form certifying its

completeness and accuracy. And, third, the cost estimates are now based

on an average rate per hour of $25 per hour for auditees and $70 per

hour for auditors.

The 1996 Amendments increased the threshold that triggers an audit

requirement from $25,000 to $300,000, thereby reducing the number of

entities subject to the Act's requirements from approximately 35,000

entities under the existing requirements to approximately 25,000

entities under the 1996 Amendments. As a result, the overall burden

hours of this information collection decreased by 43,200 hours (from

910,000 burden hours under the existing requirements to 866,800 under

the new requirements). However, the total annualized cost of this

information collection increased by $1.6 million (from $38.5 million

under the existing requirements to $40.1 million under the new

requirements), due to an increase in the number of hours incurred by

auditors (versus auditees) under the new requirements at a higher

hourly rate.

The average reporting burden per respondent increased 8.7 hours

under the new requirements (from an average of 26 hours per respondent

under the existing requirements of Circulars A-128 and A-133 to an

average of 34.7 hours per respondent under the new requirements)

primarily due to requirements to prepare and submit to the Federal

Government for the first time two new documents: (1) the auditor's

summary of audit findings, and (2) the data collection form. The

auditor's summary of audit findings is required by the 1996 Amendments.

The data collection form is required by Circular A-133 and will be used

to capture information about Federal awards in a governmentwide

database that will be accessible by the Congress, Federal Government,

non-Federal entities, and the public. These data are not currently

available, yet they are essential for making decisions about Federal

awards, including program design and delivery and audit requirements.

OMB estimates that approximately 80 percent of the annualized

reporting burden cost results from statutorily-imposed requirements

included in the 1996 Amendments, while the remaining 20 percent of the

annualized reporting burden cost results from the new OMB-imposed

requirement included in Circular A-133 to prepare a data collection

form.

Necessity of the Data Collection Form

Comments:

Federal auditors and Federal agencies supported the use of the data

collection form as an efficient and effective means to capture

governmentwide information about Federal awards administered by non-

Federal entities that expend $300,000 or more annually in Federal

awards. One Federal auditor stated that the information collection is

necessary for the Federal agency to carry out its grants management

responsibilities. College and university commenters had mixed

reactions, including some supporting the form and some not.

Many State auditors and State managers strongly opposed the

requirement to prepare a data requirement form because it is viewed as

being unnecessary, duplicative of information included in other

reports, and especially burdensome for large entities. One State

auditor commented that ``Making single audit information easy for

Federal agencies to use seems to have been the primary consideration in

the drafting of the requirements, with less concern for the preparation

time and costs of auditees and especially auditors.'' Another State

auditor noted that the Federal Government should be responsible for

categorizing audit findings by using the reporting package as the sole

source of this information. One local government manager stated that

the burden of ``spoon-feeding''

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information that is already available in the reporting package to the

Federal Government should not be borne by either auditees or auditors.

Alternatively, the commenter recommended that the data collection form

should be an internal document completed by reviewers of single audit

reports at the Federal Government level.

Most CPA commenters supported using the form to streamline the

distribution of single audit reports and improve governmentwide

collection and analysis of single audit results. One CPA commenter

stated that ``We support the use of a data collection form to

streamline distribution of audit reports and governmentwide collection

and analysis of single audit results. Steps which increase the

usefulness of audit results are positive for both the Federal

Government and our profession. Tools, such as a data collection form,

which increase the usability of audit reports serve that purpose.''

Response: The requirement to prepare and submit a data collection

form at the completion of the audit is included in Sec. ____.320(b) of

Circular A-133. To streamline the distribution of audit reports and

improve the governmentwide collection and analysis of single audit

results, Circular A-133 provides for a data collection form to be

prepared at the completion of each audit and submitted to the Federal

clearinghouse designated by OMB. The data collection form will provide

key information about the auditee, the Federal awards it administers,

and the audit results. It will serve as the basis for developing a

governmentwide database on covered Federal awards administered by

States, local governments, and non-profit organizations that expend

$300,000 or more in Federal awards annually. The database is intended

to be used by entities responsible for overseeing the funding and

administration of Federal awards (e.g., the Congress, Federal agencies,

and pass-through entities) and entities responsible for administering

Federal awards (e.g., State and government officials and board of

directors of non-profit organizations). The information provided by the

database is intended to be used to make better decisions about which

Federal awards and recipients to fund in the future, identifying and

resolving areas of noncompliance, and improving the administration and

delivery of Federal awards.

In addition, this information is essential in developing effective

governmentwide audit policies over Federal awards. For example, OMB is

required by the 1996 Amendments to perform a biennial review of the

threshold that triggers an audit requirement, prescribe a risk-based

approach to auditing major programs, and provide guidance on other

matters necessary to implement the Act. OMB cannot perform its duties

required by the Act or develop effective future audit policies without

the information to be collected in the database.

Initiatives, such as the Government Performance and Results Act of

1993 and Government Management Reform Act of 1994, highlighted the need

for the Federal Government to improve its oversight of and

accountability for the over $220 billion of Federal awards it funds

annually. The information provided by the database will help Federal

agencies fulfill their grants management responsibilities.

OMB believes that the development of a governmentwide database on

Federal awards administered by non-Federal entities that expend

$300,000 or more in Federal awards annually is critical. OMB also

believes that the most efficient and effective approach to collecting

these data is to have the auditee and auditor provide the required

information to the Federal Government in a standardized form. An

alternative to this approach would be to have the Federal Government

extract the required data elements from the reporting package and enter

the data into a database. However, OMB believes that the auditee and

auditor are most familiar with the auditee's activities and the Federal

awards it administers, and have a thorough understanding of the audit

results. Therefore, it is most likely that the information would be

more accurate if provided by the auditee and auditor than if the

Federal Government compiled this information from the reporting

packages.

The data collection form also permits streamlining of the report

distribution process. The form identifies which Federal agencies are

required to receive a copy of the complete reporting package. When the

schedule of findings and questioned costs disclosed no findings

relative to the Federal awards funded by the Federal agency, and the

summary schedule of prior audit findings did not report on the status

of any audit findings relating to Federal awards funded by the Federal

agency or pass-through entity (see Sec. ____.235(c) and

Sec. ____.320(d) and (e) of the Circular for report submission

requirements), the auditee will no longer be required to send a

complete reporting package to each Federal agency. Without the data

collection form (and the auditor's association with it), the Federal

clearinghouse would have to review each reporting package submitted to

determine which Federal agencies are required to receive a copy of the

reporting package.

Data Collection Form Duplicates Other Reported Information

Comment

Many commenters--mostly State auditors and colleges and

universities--are concerned about the need to repeat information on the

data collection form that is readily available in the reporting

package. Many State auditors specifically identified renumbered items

ix, x, and xi on the data collection form (Sec. ____.320(b)) as being

the same information presented on the schedule of expenditures of

Federal awards (Sec. ____.310(b)). They stated that providing this

information again on the form will be a time consuming and burdensome

effort, as the schedule of expenditures of Federal awards in some

States can range from 17 pages (with more than 700 Federal awards) to

over 60 pages in length. Many State auditors also stated that

renumbered item xii on the form is also particularly burdensome. Item

xii requires a yes or no statement as to whether there are audit

findings and requires that the total amount of questioned costs for

each Federal award be included in the form.

Many State auditors suggest that the required information on the

form be limited to only those programs with audit findings. Another

State auditor suggested significantly reducing the required data

elements included in the form and having the Federal Government input

the Federal award and audit results data using the reporting package.

This State auditor suggested that ``OMB could require that the schedule

of expenditures of Federal awards be established in a columnar format

with the specified data elements across the top with no subtotals

appearing and by prohibiting the inclusion of extraneous rows and

columns of data which have a tendency to creep in. Essentially, OMB

could require the schedule to look like a spreadsheet containing a

database of information.''

Most college and university commenters stated that the data

collection form duplicates information already available from the

schedule of expenditures of Federal awards and auditor's reports. The

views of many respondents are reflected in the following statement by

one college and university commenter that recommended ``that the

schedule of expenditures of Federal awards be expanded to incorporate

the necessary

[[Page 35305]]

data and that information in the auditor's reports be cross-referenced

to the schedule of expenditures of Federal awards to achieve the

equivalent of the data collection form without creating another form.''

Another college and university commenter stated that ``The recapping of

Catalog of Federal Domestic Assistance (CFDA) number and name of each

program is entirely unwarranted. So is the requirement to list

individual awards within a cluster. If the information is needed, it

should be separately gathered by the authorized Federal paying

agencies. Surely, this information is available for each recipient.''

One Federal auditor encouraged OMB to explore the possibility of

incorporating the schedule of expenditures of Federal awards in the

data collection form to reduce redundancy.

One Federal auditor, one State manager, and one CPA commenter

stated that it was duplicative to include a summary of the auditor's

results in the schedule of findings and questioned costs prepared by

the auditor (required by Sec. ____.505(d)(1) of the Circular) and to

present essentially the same information in the data collection form.

One commenter recommended that, if the auditor prepares the data

collection form, then the auditor's summary can be included in the data

collection form and the requirement to include the auditor's summary in

the schedule of findings and questioned costs can be removed from the

Circular. One CPA commenter stated that ``Elimination of the summary of

auditor results (data collection form would serve as the summary) could

potentially reduce auditor time spent by one-half.''

Several commenters suggested requiring the data collection form to

be prepared only when there are no audit findings and submitting it in

lieu of the complete reporting package.

Response: OMB acknowledges that there are many duplicative aspects

of the proposed data collection form. OMB has already begun working

with the Federal clearinghouse to implement some of the suggestions

provided by commenters, such as providing for the electronic submission

of the data collection form information through the Internet and the

electronic submission of the entire reporting package. OMB is fully

committed to reducing or eliminating duplication in the future through

electronic means. However, the Federal Government needs the information

provided by the data collection form currently. Therefore, in the near

term, reporting required by the Circular will be submitted initially to

the Federal Government in ``hard copy.''

The proposed revision states that the form will use a ``machine-

readable format.'' This term was removed from the Circular to provide

the Federal clearinghouse flexibility in processing the initial data

collections. OMB expects iterative developments in the data submission

process which will evolve from initial hard copy submissions to

electronic submissions.

Section ____.320(j) of Circular A-133 states that ``Nothing in this

part shall preclude electronic submissions to the Federal clearinghouse

in such manner as may be approved by OMB. With OMB approval, the

Federal clearinghouse may pilot test methods of electronic

submissions.'' The first phase of this pilot test has already begun and

it is concentrating on providing auditees with the means to

electronically submit the data collection form information through the

Internet to the Federal clearinghouse for fiscal years beginning after

June 30, 1997. In addition, the Federal clearinghouse is working with

certain States to develop a mechanism whereby auditees may submit the

required information to the Federal clearinghouse in a computerized

format or diskette for fiscal years beginning after June 30, 1997.

The objective of the second phase will be to develop the capability

to electronically submit the complete reporting package or key

components of it, such as the auditee's schedule of expenditures of

Federal awards and the auditor's schedule of findings and questioned

costs. It is expected that, when auditees submit their reporting

packages electronically, there will no longer be a need for the data

collection form. However, the Federal clearinghouse will continue to

process data collection forms for auditees that are unable or choose

not to submit their reporting packages electronically.

Until such time as electronic submission is available, OMB's intent

is to simplify the preparation of the data collection form by only

requesting information in the form that is already required to be

included in the reporting package. While this approach results in some

duplication, it is intended to facilitate the ease of completing the

form and the accuracy of the information provided.

With respect to renumbered items ix, x, and xi on the data

collection form, OMB believes that it is necessary to capture Federal

award information at this level of detail. The governmentwide database

must contain information at the Federal program level so that future

decisions about Federal awards and related audit policies (e.g., audit

thresholds, the risk-based approach to determining major programs) can

be made. Some commenters appeared to misunderstand the intended level

of detail. For instance, one commenter indicated that it was onerous to

list individual awards within a cluster of programs. Other than

Research and Development (R&D), most clusters of programs include only

about two or three Federal programs (CFDA numbers). For R&D, total

Federal awards expended may be shown either by individual award or by

Federal agency and major subdivision within the Federal agency.

It is also important to track in the governmentwide database not

only which Federal awards had audit findings but also an indication of

the nature of the audit findings relative to the Federal awards. For

this reason, renumbered item xii in the proposed form is retained. Item

xii requires a yes or no statement as to whether there are audit

findings and the total amount of any questioned costs related to each

Federal award. It also requires an indication of the type of compliance

requirement to which the audit findings relate. This information is

critically important for monitoring Federal awards, identifying

systemic problems, and developing future policy changes for Federal

awards.

In response to the comments received suggesting that the

information in the form be limited to only those programs with audit

findings, OMB believes that it is important that the governmentwide

database include information about all Federal awards administered by

auditees, not just those Federal awards with findings. The form must

reflect each Federal award to ensure the completeness of the database,

which will be important for future decisionmaking.

OMB does not support the comments suggesting that the schedule of

expenditures of Federal awards be expanded to serve in lieu of the data

collection form and that the Federal Government input the data using

the reporting package. Similarly, OMB does not support the suggestion

that the form be submitted only when there are no audit findings and in

lieu of submitting the reporting package. OMB's long term goal is to

eliminate the data collection form for auditees that report

electronically in the future. However, in the near term, when hard copy

reports are submitted, OMB opposes expanding the minimum reporting

requirements on auditees beyond those included in Sec. ____.310(b) of

the Circular and having the Federal Government input the data

[[Page 35306]]

using the reporting package. As previously stated, OMB believes that

the information would be more accurate if prepared by the auditee and

auditor than if the Federal Government compiled this information from

the reporting packages.

In response to comments received regarding the duplication between

information required to be included in the form and also in the summary

of audit results required by Sec. ____.505(d)(1) of Circular, OMB

acknowledges the duplication. However, the requirement for the auditor

to prepare a summary of the auditor's results is contained 1996

Amendments (31 U.S.C. 7502(g)(2)). Also, Congress intended for this

summary to be readily available to any reader of the reporting package.

Some commenters suggested that the data collection form could satisfy

the Act's summary reporting requirements, rather than preparing a

separate schedule. However, the data collection form cannot be used to

satisfy the Act's requirement because it will not be available to all

users of the reporting package. In fact, the form will only be sent to

the Federal clearinghouse. Also, this duplication can be eliminated

once reporting packages are submitted electronically.

Data Elements in the Data Collection Form

Comment

Many comments were received addressing various data elements

included in proposed data collection form (Sec. ____.320(b)) as

follows: former item 2--Commenters suggested removing the requirement

to state whether the auditor's report indicated that the auditor had

substantial doubt about the auditee's ability to continue as a going

concern; renumbered item vi--A commenter recommended removing the

requirement to list which pass-through entities are required to receive

a copy of the reporting package; renumbered item xii--A commenter

suggested removing the list of types of compliance requirements

(particularly the item for ``other'') into which audit findings are to

be categorized, and including in its place a reference to the

compliance supplement which will list the types of compliance

requirements which the auditor is expected to test; renumbered item

xiii--A commenter noted that it may be necessary for auditees to

provide multiple employer identification numbers (EINs); and,

renumbered item xv--A commenter questioned whether this item was

necessary since every auditee will have either a cognizant or oversight

agency for audit.

Response: Sec. ____.320(b) of Circular A-133 was revised to reflect

several modifications as a result of these comments. First, former item

2 was removed from the final revision for consistency purposes because

the requirement to report ``going concern'' information in the summary

of the auditor's results (Sec. ____.505(d)(1)) was removed. Second,

renumbered item vi was modified to remove the requirement to list pass-

through entities that are required to receive a copy of the reporting

package. Third, renumbered item xii was revised to reflect the types of

compliance requirements included in the provisional ``Circular A-133

Compliance Supplement'' (which is Appendix B to Circular A-133).

Fourth, renumbered item xiii was modified to indicate whether there are

multiple EINs. While not currently required, it may be necessary in the

future for auditees to provide each EIN covered by the form for

identification purposes. And, finally, a clarification was made to

renumbered item xv. It is important to distinguish between whether an

auditee has either a cognizant or oversight agency for audit, and to

include this information in the governmentwide datatbase because of the

different duties assigned to cognizant and oversight agencies in

Sec. ____.400(a) and (b) of Circular A-133.

Comment

Suggestions were also made to add to the data collection form each

of the matters addressed in the summary of the auditor's results,

described in Sec. ____.505(d)(1), such as the matters discussed in

Sec. ____.505(d)(1)(ii), Sec. ____.505(d)(1)(iii), and

Sec. ____.505(d)(1)(iv).

Response: Sec. ____.320(b) of Circular A-133 was revised to include

in the data collection form each of the matters addressed in the

summary of the auditor's results under Sec. ____.505(d)(1).

Suggested Additional Data Elements for Inclusion in the Form

Comment

Several commenters--primarily Federal auditors and a pass-through

entity--requested that the data collection form indicate if a

management letter was issued. Commenters stated that management letters

sometimes discuss significant deficiencies that are not disclosed in

the auditor's report. One commenter requested that management letters

be submitted to the Federal Government as part of the reporting package

and, if that were not possible, then the data collection form should

indicate if a management letter was issued. Conversely, two State

auditors requested that the requirement in Sec. ____.320(f) of the

proposed revision, which requires auditees to provide copies of

management letters if requested by a Federal agency and pass-through

entity, be removed from the Circular.

Response: No changes to Circular A-133 were made as a result of

these comments. The management letter will not be a required component

of the reporting package (Sec. ____.320(c)) and the data elements on

the form (Sec. ____.320(b)) will not include a statement as to whether

or not a management letter was issued by the auditor. The Circular

(Sec. ____.510(a)) clearly describes matters that the auditor shall

report as audit findings in the schedule of findings and questioned

costs. In no instance should the management letter be used as a

substitute for reporting audit findings in the schedule of findings and

questioned costs. OMB believes that the fundamental cause of the

concern raised by the Federal auditors regarding the misuse of

management letters has more to do with audit quality than with the

content of management letters. OMB believes that it is more effective

for Federal agencies to address the issue of audit quality (including

adherence to professional standards and regulatory audit requirements)

as part of their quality reviews of auditors performing audits in

accordance with Circular.

Also, no change was made to Sec. ____.320(f) of Circular A-133. OMB

agrees with many commenters that it is not necessary to routinely

submit all management letters issued by auditors. However, because

management letters may contain information relevant to the needs of

Federal agencies and pass-through entities to monitor Federal awards,

the provision permitting Federal agencies and pass-through entities to

request a copy of management letters remains unchanged in Circular A-

133.

Who Should Sign the Data Collection Form for the Auditee

Comment

Several commenters questioned who within an auditee's organization

would be required to sign the data collection form, particularly for

large entities, such as a State government.

Response: The proposed revision (Sec. ____.320(b)) provided that

the chief executive officer or chief financial officer shall sign a

statement that the

[[Page 35307]]

information on the form is accurate and complete. The requirement was

modified to clearly indicate that a senior official from State or local

government shall sign the form, as appropriate. The intent of this

requirement is to ensure that the form is signed by a senior or

executive level representative of the auditee that is authorized to,

and can be held accountable for, representations made to the Federal

Government on behalf of the auditee. The certifying official should be

knowledgeable about the Federal awards administered by the auditee, the

requirements of Circular A-133, and the actual audit results. In a

State-wide single audit, it is expected that a State official (e.g.,

State controller, State treasurer) would sign the form.

Level of Form's Specificity Provided in the Circular and Supplemental

Forms

Comment

One Federal auditor stated that, while it was necessary to include

specific certification language on the form to provide reviewers with

sufficient detail to understand the proposal, the Circular should not

contain language that is so detailed that it precludes amending the

data collection form without revising the Circular. The commenter

recommended removing the certification language in Sec. ____.320(b) of

the Circular and including a provision authorizing OMB to add or remove

data elements, as needed. A CPA commented that the final revised

Circular should provide specific guidance on preparing the form and

include, as an attachment, the form itself and the standard wording to

be developed by OMB and the audit community to appropriately

characterize the auditor's and auditee's responsibility for information

included in the form. One college and university commenter recommended

that OMB clearly state that the data collection form is the only form

that can be used by Federal agencies and pass-through entities to

gather information related to the audit and that entities may not

develop their own supplemental forms.

Response: Circular A-133 (Sec. ____.320(b)) identifies the data

elements to be included in the data collection form and provides a

general description of the auditee's certification and auditor's

statement that will accompany the form. The data collection form to be

used by the Federal clearinghouse will be presented as an Appendix to

the final revised Circular A-133. The form, developed cooperatively by

a Federal interagency task force, is the only form that may be used by

a Federal agency for the purpose of collecting single audit data.

However, OMB expects that the standard form may be modified in the

future, as circumstances warrant. Any revisions require approval from

OMB's Office of Information and Regulatory Affairs and the revised

form, or a notice of its revision, will be published in the Federal

Register.

Data Collection Form Sent Only to the Federal Clearinghouse

Comment

The CPA community's support for the proposal requiring the auditor

to prepare and sign the form was based on the understanding that the

data collection form would be sent only to the Federal clearinghouse

designated by OMB and not to Federal agencies and pass-through

entities. Also, several college and university commenters urged OMB to

permit a subrecipient to simply send a letter to a pass-through entity

when there are no audit findings that relate to the Federal awards

provided by the pass-through entity.

Response: Several modifications were necessary to reflect this

understanding in the final revision of Circular A-133. First, Circular

A-133 now reflects that the data collection form will no longer be a

required component of the reporting package described in

Sec. ____.235(c)(3) and Sec. ____.320(c) of the Circular. Also, the

requirement for subrecipients to send copies of the data collection

form to pass-through entities was removed from Sec. ____.235(c)(3) and

Sec. ____.320(e) of the Circular.

When there are no audit findings that relate to a Federal award

provided by a pass-through entity, the subrecipient is not required to

send the reporting package to that pass-through entity. In this

situation, without receiving the data collection form, the pass-through

entity would not otherwise receive any audit result information about

the Federal awards it provides to the subrecipient. Therefore,

Sec. ____.235(c)(3) and Sec. ____.320(e) of Circular A-133 requires a

subrecipient in this situation to inform a pass-through entity that an

audit of the subrecipient was conducted in accordance with Circular A-

133 and that no audit findings relative to the Federal awards provided

by the pass-through entity were reported. Examples of ways in which the

subrecipient may communicate this information to the pass-through

entity include: (1) writing a letter to the pass-through entity

indicating that an audit of the subrecipient was conducted in

accordance with Circular A-133 and that no audit findings relative to

the Federal awards provided by the pass-through entity were reported,

(2) submitting the complete reporting package to the pass-through

entity, and (3) a combination of both (1) and (2).

Applicability of Freedom of Information Act and Other Federal Laws

Comment

One CPA commenter asked whether the data collection form is

available under the Freedom of Information Act (FOIA) and whether other

Federal laws apply, such as those relating to false statements.

Response: The data collection form is subject to FOIA. Also,

representations made by auditees and auditors are subject to applicable

penalties for false statements.

Report Copies

Comment

One Federal auditor suggested that a copy of the report be provided

to the Federal clearinghouse by all auditees that have cognizant

agencies for audit (i.e., auditees that expend more than $25 million a

year in Federal awards), so that each cognizant agency can carry out

its responsibilities required by the Circular. A State agency commented

that reports should be provided for every Federal agency and pass-

through entity that provided Federal awards to the auditee, regardless

if any audit findings are reported or not. This commenter stated that

the reports are necessary for closeout and other program monitoring

purposes, and that this State agency will now be required to request

all reports. The commenter also stated that this proposal to streamline

the report distribution process places additional pressure on auditors

to issue more reports with no audit findings.

Response: No change was made to the number of reporting package

copies to be sent to the Federal clearinghouse. In all instances, the

Federal clearinghouse will retain one copy for archival purposes. If

requested by the cognizant agency for audit, the Federal clearinghouse

will provide a copy of the reporting package to the cognizant agency.

OMB believes that the benefits to be achieved through report

distribution streamlining outweigh the possible inconveniences that may

result for some Federal agencies and pass-through entities from having

to request report copies, as needed. Therefore, no changes to the

proposed streamlined report distribution process were made.

Comment

One local government manager commented that savings may result from

[[Page 35308]]

using the data collection form rather than submitting the reporting

package to every Federal agency and pass-through entity. However, if

those entities routinely request copies of the reporting package

regardless of the audit results, then the savings will diminish. It was

suggested that OMB discourage routine requests for the reporting

packages and monitor report distribution during the next few years.

Response: For several reasons, OMB does not expect Federal agencies

or pass-through entities to routinely request copies of reporting

packages that do not include audit findings or report on the status of

prior findings relative to the Federal awards funded by the Federal

agency or pass-through entity. First, Federal agencies and pass-through

entities are facing resource constraints with respect to both the

administrative capacity to collect and store reports and the

professional capability to review and process ``no findings'' reports.

Also, once Federal agencies and pass-through entities become familiar

with the information that will be routinely provided to them from (or

accessible to them through) the governmentwide database maintained by

the Federal clearinghouse, OMB believes requests for reporting packages

will decline. However, over the next few years, OMB will periodically

review if the objectives of streamlining the report distribution

process have been met.

Report Submission and Distribution

Comment

Several commenters requested clarification regarding the report

submission requirements.

Response: Sec. ____.320 (d) and (e) of the proposed revision were

modified slightly to reflect the following report submission

requirements. In all instances, an auditee is required to submit, at a

minimum, the data collection form and one copy of the reporting package

to the Federal clearinghouse. An auditee is also required to submit to

the Federal clearinghouse a copy of the reporting package for each

Federal awarding agency when there are audit findings reported in the

auditor's schedule of findings and questioned costs, or the auditee's

summary of prior audit findings reports on the status of any audit

findings, relating to the Federal awards that the Federal awarding

agency provided directly. The Federal clearinghouse will be responsible

for actually distributing the reporting packages to the appropriate

Federal agencies.

Where the auditee is also a subrecipient, the subrecipient shall

submit a copy of the reporting package to each pass-through entity when

there are audit findings reported in the auditor's schedule of findings

and questioned costs, or the auditee's summary of prior audit findings

reports on the status of any audit findings, relating to the Federal

awards provided by the pass-through entity. When there are no audit

findings reported in the auditor's schedule of findings and questioned

costs and the auditee's summary schedule of prior audit findings does

not report on the status of any audit findings relating to the Federal

awards provided by the pass-through entity, the subrecipient is not

required to submit the reporting package to the pass-through entity,

unless the pass-through entity requests a copy under Sec. ____.320(f).

However, if the subrecipient chooses not to submit the reporting

package to the pass-through entity in these circumstances, the

subrecipient must inform the pass-through entity, in writing, that an

audit of the subrecipient was conducted in accordance with Circular A-

133, and that no audit findings were reported (nor was the status of

any prior audit finding reported) that relate to the Federal awards

provided by the pass-through entity.

To illustrate the report submission process, suppose an auditee

administers four Federal awards. The first program is provided directly

to the auditee from the U.S. Department of Health and Human Services

(HHS), and the auditor reported audit findings relating to this

program. The second program is provided directly to the auditee from

the U.S. Department of Education (ED), and no audit findings have ever

been reported relating to this program. The third program is provided

to the auditee by a State agency, or pass-through entity, funded by the

U.S. Department of Labor, and audit findings were reported relating to

this program. The fourth program is provided to the auditee by a local

government pass-through entity funded by the U.S. Department of

Agriculture, and no audit findings have ever been reported relating to

this program. In this example, the auditee would be required to submit

to the Federal clearinghouse a data collection form and two copies of

the reporting package (one for the Federal clearinghouse to retain for

archival purposes and one for the Federal clearinghouse to distribute

to HHS). The auditee would also be required to submit a reporting

package to the State agency because audit findings were reported that

relate to the third program and the State agency needs the reporting

package to ensure appropriate resolution of the audit findings. With

respect to the fourth program, the auditee could either send the

reporting package to the local government, or send some form of written

communication stating that the audit was conducted in accordance with

the Circular and no audit findings were reported relating to the fourth

program.

Federal Clearinghouse Responsibilities

Comment

A few college and university commenters requested that the Federal

clearinghouse be responsible for supplying all report copies to Federal

agencies and pass-through entities. One commenter suggested that the

Federal clearinghouse provide reporting packages in electronic form

accessible to potential users through the Internet. Another respondent

requested more specific information about acceptable forms of

electronic submissions.

Response: Until such time as the reporting packages are available

in electronic form, it is not feasible for the Federal clearinghouse to

be responsible for distributing reporting packages to pass-through

entities. It is possible, however, that once reporting packages are

available electronically, there may not be a continued need for pass-

through entities to receive ``hard paper copies'' of the reporting

packages. As previously noted, the Federal clearinghouse expects to be

capable of processing reporting packages electronically for audits of

fiscal years beginning after June 30, 1998.

Requirement for the Auditor To Prepare and Sign the Data Collection

Form

Comment

In the preamble of the proposed revision, OMB stated that it was

considering adding a provision that requires the auditor (rather than

the auditee) to prepare and sign the data collection form and requested

respondents to comment on this proposal. OMB received approximately 45

comments --'' more than any other individual issue included in the

November 5, 1996, Federal Register publication --'' in response to this

proposed requirement.

All Federal auditors and State governments, and most CPAs and

Federal agencies supported this proposal. Many of these respondents

commented that the auditor should prepare and sign the sections of the

form that relate to the audit results, and that, even if the auditor

prepares and

[[Page 35309]]

signs sections of the form, the auditee should also be required to sign

the form certifying to the completeness and accuracy of the entire

form.

Federal auditors, Federal agencies, and State governments cited the

following reasons for supporting the proposal for auditors to prepare

and sign the form: (1) greater assurance as to the accuracy of the form

and the governmentwide database, (2) greater efficiency in preparing

the form, (3) more streamlined audit reporting achieved by having the

auditor sign the form rather than issuing a separate report describing

the auditor's association with and responsibility for the form, (4)

more timely data collection, and (5) reduced need for independent

verification of data included in the governmentwide database by Federal

agencies. One Federal agency supported having the auditor prepare the

form but did not support requiring the auditor to sign the form.

Reasons cited included that the proposal is ``contrary to and

inconsistent with the Government's long-established practice of

requiring the institution [auditee], not the auditor, to sign existing

certifications' and that the proposal raises new concerns about the

auditor's litigation liability, which will take time to research and

resolve.

Most CPA commenters indicated that independent auditor association

with the form would enhance its usefulness. However, most CPA

commenters and some Federal auditors and Federal agencies were

concerned that certain report users may view the information contained

in the form as a substitute for reading the full auditor's reports,

which present a more complete picture of the auditor's testing and

findings. These commenters also stated their belief that a form can be

developed that would meet the needs of OMB and Federal agencies and

also address the concerns of the CPA community. Commenters strongly

encouraged OMB to work with the American Institute of Certified Public

Accountants (AICPA), the Inspectors General, Federal agencies, and

other interested parties to develop a useful data collection form, and

many commenters offered to assist OMB in this effort.

Several CPA commenters suggested that, to provide appropriate

protection to auditors, the auditor signature section of the form

should possess certain elements including: (1) a statement that certain

information included in the form is based on the auditor's reports and

is not a substitute for such reports, (2) a statement concerning the

availability of the auditor's reports, (3) a statement that the content

of the form is limited to information prescribed by OMB, and (4) a

clear indication of which information is being provided by the auditor

versus that which is the responsibility of the auditee. CPA commenters'

support for this proposal was based on the understanding that: (1) the

form would be sent only to the Federal clearinghouse and not to Federal

agencies and pass-through entities, and (2) acceptable language would

be added to the form to appropriately characterize the nature of the

information included in the form and the auditor's and auditee's

responsibility for information included in the form. One CPA commenter

did not support the proposal stating that it ``is beyond the scope of

reporting required by professional and governmental auditing

standards.''

Most State auditors and one professional organization commented

that they were strongly opposed to requiring the auditor to prepare and

sign the data collection form. Reasons cited included: (1) the

requirement for the auditee to prepare and sign the form emphasizes the

auditee's responsibility for administering Federal funds in compliance

with the law, ensuring the accuracy and completeness of information

provided to the Federal Government, and resolving deficiencies

uncovered by audits; (2) the type of information required by the form

is readily available and should be clearly understood by the auditee;

(3) if the auditor is required to sign the form, the auditor's legal

liability exposure may increase, which will result in increased audit

fees; (4) it is not justified to reduce burden on auditees by

increasing the burden on auditors; (5) if the auditor is required to

prepare the form, the auditor's independence may be questioned and the

distinction between management and auditor responsibilities may be

blurred; and, (6) it is uncertain whether the auditor or auditee can

prepare the form more efficiently.

One State auditor commented that ``We see it [the requirement for

the auditee to prepare and sign the form] as the first step in a

process that will ultimately result in auditees' providing management

assertions on internal controls and compliance regarding their use of

Federal funds * * * We view the requirement for the auditee to prepare

the data collection form as a kind of ``homework assignment'' by which

auditee personnel will read the auditor's reports and start to

understand the significance of the issues covered in those reports * *

* Therefore, we are quite concerned with OMB's suggestion * * * [to

require] the auditor to prepare and sign the data collection form.''

Several State auditors suggested alternatives to the proposal for

the auditor to prepare and sign the form including: (1) requiring the

auditee to prepare the form and have the auditor review the form (but

not as a separate engagement) for accuracy in relation to the auditee's

financial statements taken as a whole, for limited distribution to the

Federal Government; (2) requiring the auditee to prepare the form and

have the auditor issue a separate letter of assurance on the form

regarding its reasonableness; (3) removing the requirement to prepare

the form and requiring the auditee to send a transmittal letter along

with the audit report to the Federal Government, stating that the audit

was completed in accordance with the single audit requirements; (4)

presenting certain summary information on the form with no signature by

either the auditee or auditor, and having the auditee sign a separate

form asserting that an audit in accordance with Circular A-133 was

performed; (5) adding a provision to the financial reporting section of

the compliance supplement directing the auditor to verify the

completeness and accuracy of the form; and, (6) requiring the auditee

to prepare the form and having the auditor sign it, provided that the

auditor's signature is accompanied by standard language specifically

describing and limiting the assurance the auditor is providing by

signing the form.

Several State auditors supported the proposal for the auditor to

sign the form, provided that the form includes ``liability limiting

statements'' similar to the wording suggested by the CPA commenters,

and indicated that it would be more efficient for auditors to prepare

the form.

Two college and university commenters opposed the proposal stating

that many colleges and universities could readily prepare the form

similar to other documents they are required to prepare (e.g., the

schedule of Federal awards and corrective action plans) and that the

additional cost for the auditor to prepare the form is not justified

compared to the benefit received. However, one of these college and

university commenters also indicated that having the auditor prepare

the form would add to its accuracy and greatly assist many auditees and

suggested a more flexible solution to permit either the auditor or

auditee to prepare the form (at the option of the auditee) and require

the auditor to sign the form as a reviewer. One college and university

commenter indicated that neither the auditors nor auditees want to

prepare the form

[[Page 35310]]

because of the additional cost but that, if OMB decides to require the

form, then the auditor would be the logical choice to prepare the form.

One local government commented that the single audit is a

collaborative effort between auditors and auditees and that the process

used to prepare and sign the form should be similar to procedures used

to satisfy other single audit requirements. Specifically, the commenter

suggested that the auditee prepare the form with the assistance of the

auditor and that both sign the form.

Response: Auditor association with the data collection form is

essential to streamlining the audit report distribution process and

ensuring the accuracy of the governmentwide database. However, OMB

agrees with the view of many commenters that the auditee is primarily

responsible for ensuring the accuracy and completeness of Federal award

information submitted to the Federal Government, and that this

responsibility should not be diminished. Therefore, the requirement for

the auditee to sign a statement included in the form that acknowledges

the auditee's responsibility for the entire form and certifies its

completeness and accuracy remains in Sec. ____.320(b) of Circular A-

133. In addition, the proposal requiring the auditor to prepare and

sign the sections of the form that relate to the auditor's results and

the Federal awards was adopted in the final revision of Circular A-133

(Sec. ____.320(b)(3)). The Circular also states that the auditee is

responsible for submitting the data collection form and reporting

package to the appropriate parties (Sec. ____.320(d) and (e)).

OMB commits to working with the audit community (e.g., Inspectors

General, AICPA, State auditors), Federal agencies, and other interested

parties to finalize language on the form to appropriately characterize

the auditor's and auditee's responsibility for information on the form.

As a starting point, OMB used the recommendations provided by one CPA

commenter for the auditor's standard language including: (1) a

statement that certain information included in the form is based on the

auditor's reports and is not a substitute for such reports, (2) a

statement concerning the availability of the auditor's reports, (3) a

statement that the content of the form is limited to information

prescribed by OMB, and (4) a clear indication of which information is

being provided by the auditor versus that which is the responsibility

of the auditee. OMB concurs with several CPA commenters that stated

that the auditor's exposure to litigation regarding association with

the form could be reduced by incorporating acceptable standard language

in the form.

Increased Costs for Auditors To Prepare and Sign Form

Comment

Several respondents commented that requiring the auditor to prepare

and sign the data collection form will result in increased audit costs.

One CPA stated that the proposal ``is perceived as increasing auditor

responsibility without increasing the value of the audit for which the

auditee would be willing to compensate the auditor.'' One State auditor

commented that ``it is misleading to consider requiring the auditor to

do this [prepare the form] while speculating that it will not

significantly increase audit costs. The auditor is entitled to charge

for the time associated with preparing the form and for assuming the

increased liability of associating his name with the information on the

form.'' One State manager stated that, if the requirement to prepare

the data collection form remains, the auditor should be responsible for

the data collection provided OMB determines ``a true-cost benefit of

this requirement before implementing it.''

Several college and university commenters stated that the

preparation of a data collection form will result in increased and

unreimbursable audit costs at a time when many organizations have

reached or exceeded the administrative cap under the Facilities and

Administrative reimbursement rate.

One Federal auditor commented that ``we believe that

``experienced'' auditors should be able to provide at a reasonable cost

the information requested on the data collection form.'' One Federal

agency commenter stated that ``The additional cost of completing this

form is expected to be insignificant, particularly when its intended

use is considered.''

Response: OMB acknowledges that there are costs associated with the

new requirement to prepare the data collection form. Using an average

rate per hour of $25 per hour for auditees and $70 per hour for

auditors, OMB estimates that the cost for auditor's to prepare and sign

specified sections of the form is $7.3 million and the cost for

auditees to prepare specified sections of the form and sign it is $1.2

million, for a total cost of $8.5 million.

OMB believes the decision to require the form is justified for

several reasons. First, costs will be fully or partially offset by the

savings realized from implementing other provisions of the 1996

Amendments and the revised Circular A-133. Examples of opportunities

for savings include: the reduced scope of audits of low-risk auditees;

the elimination of auditing and reporting requirements previously

associated with non-major programs; and, the elimination of the

requirement to report all matters of noncompliance, regardless of

significance. Second, the data collection form, including the auditor's

association with it, is essential to streamlining the historical report

distribution and review processes and reducing associated burden.

Finally, OMB believes that the data collection form, including the

auditor's association with it, is essential to the development of a

reliable governmentwide database that is critical to effective Federal

award administration.

With respect to comments received from several colleges and

universities stating that this new requirement may result in

unreimbursed audit costs because their administrative caps have been

reached, OMB suggests that auditees consider discussing with their

auditor whether any increases due to preparing the data collection form

will be offset by: audit cost savings associated with reduced scope of

audit work for a low-risk auditee, the auditor having to audit fewer

programs under the risk-based approach, a reduction of audit work and

related reporting for Federal programs not considered major, and the

removal of the requirement to report all instances of noncompliance.

It will take several years for OMB to determine the actual ``cost-

benefit'' of this new requirement. However, OMB believes that it is

important to implement this reporting requirement as part of the final

revision of Circular A-133, rather than postpone implementation until a

later date. The estimates presented in Table 1 are based on the best

information available to date. OMB will reevaluate the burden estimates

within the next three years (the sunset date for resubmission for

approval under the Paperwork Reduction Act of 1980, as amended) using

actual results.

Retention of Audit Workpapers

Comment

One Federal auditor requested that Federal awarding agencies be

added to the list of entities that may notify the auditor to retain the

working papers beyond three years.

Response: No change was made to the Circular as a result of these

comments. OMB believes that requests by Federal awarding agencies for

auditors to retain working papers beyond the minimum

[[Page 35311]]

period should be coordinated through either the cognizant or oversight

agency for audit.

Schedule of Expenditures of Federal Awards

Comment

One State auditor commented that the State's accounting system

could not capture Federal award expenditure information and requested

that the Circular permit alternatives methods of reporting Federal

award information, such as reporting receipts.

Response: No change was made to the Circular based on this comment.

Auditees shall report the amount of expenditures of Federal awards.

This information is important to Federal agencies and pass-through

entities and the amount of Federal award expenditures is critical to

every monetary determination required by the Circular (e.g., the

threshold that triggers a Circular A-133 audit requirement, and the

dollar threshold used to distinguish Type A and Type B programs using

the risk-based approach to determining major programs). Also, the

requirement to report Federal award expenditures is consistent with the

financial management systems requirements of Sec. ____.20 in the Grants

Management Common Rule, published March 11, 1988 (53 FR 8034) and

amended April 19, 1995 (60 FR 19638), whereby States' systems should

permit accounting for expenditures to a level sufficient to demonstrate

compliance with applicable laws and regulations.

Comment

Several commenters interpreted the proposal as requiring that the

schedule of expenditures of Federal awards include information about

the amount of Federal funds awarded (rather than Federal awards

expended), and that such information be presented by award year. One

commenter asked whether the information requested by Federal agencies

and pass-through entities to be included on the schedule was limited to

the minimum requirements or whether such requests could include

additional information.

Response: A change was made to Sec. ____.310(b) to clarify that the

schedule requires presentation of the amounts of Federal awards

expended, rather than the amounts awarded. Also, Sec. ____.310(b) was

modified to indicate that an auditee may choose to provide information

requested by Federal agencies and pass-through entities to make the

schedule easier to use. However, the auditee is not required by the

Circular to provide information beyond the minimum requirements

described in Sec. ____.310(b).

Comment

Sec. ____.310(b)(1) of the proposed revision requires that the

schedule of expenditures of Federal awards list individual Federal

programs by Federal agency and major subdivision within a Federal

agency. Many respondents strongly opposed the requirement to provide

the major subdivision within a Federal agency. Reasons cited include

that this information is readily available to the Federal Government

through the CFDA numbers and that it is particularly onerous for large

entities, such as States, to provide this information for each

individual Federal program.

Response: The requirement to list each individual Federal program

by major subdivision within a Federal agency was removed from

Sec. ____.310(b)(1) of the Circular, except for the R&D program

cluster. This revision reduces reporting burden for many auditees that

administer a large number of Federal awards. For the R&D program

cluster, auditees are provided the option of reporting Federal awards

expended either by individual Federal award or by Federal agency and

major subdivision within the Federal agency. This option reduces burden

on auditees that administer a large number of R&D awards, such as

certain colleges and universities, by permitting summary reporting at

the Federal agency and major subdivision level. Federal awarding

agencies and pass-through entities providing R&D awards should assist

auditees in identifying major subdivisions within the Federal agency

responsible for such awards.

Comment

Several commenters opposed the proposal included in

Sec. ____.310(b)(5) which requested, to the extent practical, pass-

through entities to identify on the schedule of expenditures of Federal

awards the total amount provided to subrecipients from each Type A

program and each Type B program audited as major. This provision was

perceived as burdensome. One CPA commenter was concerned that, if such

information were provided for all Type A programs, including those Type

A programs that were not audited as major, then the auditor would be

required to report on a schedule that includes unaudited information.

Response: A change was made to the Circular as a result of these

comments. The proposal requested auditees to provide information about

amounts provided to subrecipients from each Type A program and each

Type B program audited as major. The final revision to Circular A-133

requests this information for each Federal program. This change was

made to simplify the requirement but does not necessarily increase

burden on auditees because the information is not mandatory. This

information should be included on the schedule, to the extent

practical. In response to a CPA's concern, the schedule of expenditures

of Federal awards includes information about each of the Federal awards

administered by the auditee, not just those audited as major. OMB does

not believe that presenting information about amounts provided to

subrecipients is different from other information included in the

schedule relating to programs that were not audited as major.

Summary Schedule of Prior Audit Findings

Comment

Several State auditors and State agencies questioned the need for a

separate schedule reporting the status of prior audit findings. One

State auditor noted that requiring the auditor to report any material

misrepresentations made by the auditee in the schedule will increase

pressure on auditors and strain their relationship with the auditee. A

State agency commented that the information in the new summary schedule

of prior audit findings is also included in other required reports and

recommended that the cognizant agency for audit be responsible for

reviewing and approving follow-up actions outlined in the corrective

action plan. One Federal auditor noted the importance of continuing to

report deficiencies until the finding is adequately resolved and

suggested that the schedule also include a description of the means

used to substantiate the audit finding resolution.

Response: No change was made to Sec. ____.315 of the Circular as a

result of these comments. It is important for the auditee to report on

the status of prior audit findings in a consistent and systematic

manner. It is also important that the auditor assess the fairness of

management's representations included in the schedule, as required by

Sec. ____.500(e) of the Circular.

Summary of the Auditor's Results

Comment

One Federal auditor recommended revising the Circular to require

the auditor to provide a narrative summary at the beginning of the

single audit reporting package. One State auditor opposed the

requirement to prepare a

[[Page 35312]]

summary of auditor's results and commented that the Federal Government

could obtain this information by reviewing the documents included in

the reporting package.

Response: No change was made to Sec. ____.505(d)(1) of the Circular

as a result of these comments. The 1996 Amendments include a provision

(31 U.S.C. 7502(g)(2)) whereby ``the auditor shall include a summary of

the auditor's results regarding the non-Federal entity's financial

statements, internal controls, and compliance with laws and

regulations.'' OMB believes that the summary of auditor's results

prescribed by Sec. ____.505(d)(1) of the final revision satisfies the

requirements of the 1996 Amendments, and will facilitate consistency

and uniformity of the summary information provided to Federal awarding

agencies and pass-through entities and captured in the governmentwide

database.

Auditor's Schedule of Findings and Questioned Costs

Comment

Several State auditors indicated that the requirements described in

Sec. ____.505(d) (2) and (3) of the proposed revision may result in

duplicative and more cumbersome audit reporting and, as a result,

increased audit costs.

Response: No changes were made to the Circular as a result of these

comments. The purpose of Sec. ____.505(d) of the Circular is to present

the results of audit in one location or schedule. In the past, this

information was presented in a variety of locations throughout the

auditor's reports. This provision of the Circular prescribes where this

information must be reported and provides guidance on reporting audit

findings that relate to the same issue and that relate to matters

affecting both the financial statements and the Federal awards

administered by the auditee. OMB believes the reporting requirements

included in the Circular will improve the usefulness and uniformity of

audit reports.

Report Due Date

Comment

Many respondents--mostly State managers and college and university

commenters--stated that shortening the report due date from 13 months

to nine months after the end of the audit period was unrealistic and

that it will adversely affect audit scheduling and workloads, increase

audit costs and burden on auditees, and may result in increased

noncompliance by subrecipients. Many commenters suggested that the 13-

month report due date be retained in the Circular and that, if the due

date must be shortened, then a 12-month due date would be more

acceptable. One local government suggested granting an automatic

extension of the report due date to auditees that expend over $25

million in Federal awards. A Federal agency stated that a six-month

report due date should be imposed and that the two-year transition

period is unnecessary.

Response: No change was made to the Circular as a result of these

comments. The report due date is prescribed by the 1996 Amendments (31

U.S.C. 7502(h)). The 1996 Amendments require the report to be submitted

within the earlier of 30 days after receipt of the auditor's report, or

nine months after the end of the audit period for audits of fiscal

years beginning after June 30, 1998. A transition period of at least

two years is provided in the 1996 Amendments whereby the report shall

be submitted within the current 13-month due date (or 30 days after the

receipt of the auditor's report, if earlier). OMB believes that the

transition period of two years is sufficient for most auditees to meet

the new report due date. However, cognizant or oversight agencies for

audit may provide extensions to auditees.

Comment

One State auditor commented that total audit hours will increase as

a result of preparing a data collection form, and ``Since our audit

resources are limited, any increase in audit hours is likely to make it

more difficult for us to meet the 9-month reporting deadline required

by Sec. ____.320(a) of the Circular.''

Response: As presented in Table 1, OMB estimates the average number

of auditor hours necessary to prepare and sign the appropriate sections

of the data collection form to be 24 hours for auditees that administer

a large number of Federal awards and four hours for other auditees.

Moreover, the requirements of the 1996 Amendments and the final

revision to Circular A-133 are designed to reduce audit burden by

decreasing the number of entities subject to audit and improving the

effectiveness of the audit requirements. Accordingly, OMB believes that

the two-year transition period is sufficient for most auditors to

incorporate the data collection form preparation requirements into

their audit plans so that the work can be completed within the nine-

month due date.

Effective Date for the Data Collection Form Requirement

Comment

One Federal auditor stated that it was not clear from reading the

proposed revision when the proposed requirement to prepare and submit

the data collection form would be effective.

Response: The requirement to prepare and submit a data collection

form will be effective for audits of fiscal years beginning after June

30, 1996.

The proposed data collection form and its instructions follow.

John A. Koskinen,

Deputy Director for Management.

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Table 1.--Reporting Burden Estimate

----------------------------------------------------------------------------------------------------------------

New burden

---------------------------------------

Auditees Change in

Existing with a burden

burden large Other Total increase

number of auditees auditees (decrease)

programs

----------------------------------------------------------------------------------------------------------------

Number of Auditees............................. 35,000 200 24,800 25,000 (10,000)

Number of Auditors............................. 35,000 200 24,800 25,000 (10,000)

Auditee hours to prepare reporting package..... 16 48 16 1 16.3 .3

Auditee hours to prepare & sign data collection

form.......................................... ........... 6 2 1 2.0 2.0

Auditor hours to prepare auditor's reports..... 10 40 12 1 12.2 2.2

Auditor hours to prepare & sign data collection

form.......................................... ........... 24 4 1 4.2 4.2

Average hour burden per respondent............. 26 118 34 1 34.7 8.7

----------------------------------------------------------------

Total burden hours......................... 910,000 23,600 843,200 866,800 (43,200)

----------------------------------------------------------------------------------------------------------------

\1\ Weighted average.

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[FR Doc. 97-16966 Filed 6-27-97; 8:45 am]

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