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SUBSECTION 4.3.8.1
GENERAL

4.3.8.1.1

Purpose and Scope

Effective Date:

Mar. 1, 1999
 

This section contains the policies, regulations and procedures regarding compliance with the Federal Single Audit Act, as amended, and Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Nonprofit Organizations.

4.3.8.1.2

Authority

Effective Date:

Mar. 1, 1999
 

This section is issued, as revised, pursuant to the authority granted to the Director of Financial Management to "...adopt and periodically update an accounting procedures manual" [RCW 43:88:160(1)].

4.3.8.1.3

Applicability

Effective Date:

Mar. 1, 1999

4.3.8.1.3.a

Under provisions of the Single Audit Act, as amended, the state of Washington has opted to obtain a statewide Single Audit to meet the basic federal audit requirements for all federal assistance awards administered or expended by agencies or institutions of the State.

4.3.8.1.3.b

The Single Audit Act and OMB Circular A-133 establish various requirements for state agencies and institutions administering federal assistance which are included in this section. Agencies should develop internal policies in accordance with this policy and the requirements of the Act and Circular.

4.3.8.1.3.c

This part is applicable and binding on all agencies of the state of Washington receiving, administering or expending federal assistance, unless otherwise exempted by federal or state law. The Budget and Accounting Act (RCW 43.88.020) defines the term "Agency" to mean "Every state office, officer, each institution, whether educational, correctional or other, and every department, division, board and commission, except as otherwise provided…"

4.3.8.1.3.d

Agencies may request a waiver from complying with specific requirements of this part. The request must be in writing and must be approved, in writing by the Director of OFM, before the waiver may take effect. Such waivers automatically expire at the end of the fiscal biennium for which they were granted and must be reapproved, in writing, to remain in force.

4.3.8.1.4

Background

Effective Date:

Mar. 1, 1999
 

In 1984, Congress passed the Single Audit Act, which required most governmental recipients of federal assistance (e.g., state and local governments) to have organization-wide financial and compliance audits on an annual basis. Subsequently, the federal Office of Management and Budget (OMB) issued several circulars to clarify audit requirements on various types of federal assistance recipients. The original Single Audit Act, however, did not include within its coverage all agencies and institutions defined as a state agency in the state of Washington (excluded higher education).

In 1996, responding to suggestions of numerous groups, Congress amended the Single Audit Act significantly. Major changes included language to:

  • Increase and standardize the expenditure threshold for triggering a single audit to $300,000 in expenditures of federal awards per year,
  • Extend coverage to entities not covered in the original act like colleges and universities and other non-profit organizations,
  • Authorize the Director of OMB to establish a risk-based approach to determining major programs for audit coverage purposes,
  • Establish a minimum coverage requirement at 50% of expenditures of federal awards in a year,
  • Shorten and standardize the deadline for submission of single audit report information,
  • Revise the definition of internal control to recognize acceptance of Committee of Sponsoring Organizations (COSO) definition,
  • Allow biennial audits in very limited situations,
  • Exempt each nonfederal entity, with annual expenditures of federal awards less than $300,000 in any fiscal year, from compliance, in that fiscal year, with:
    • Audit requirements of the Single Audit Act, and

    • Any applicable requirements concerning financial audits contained in federal statutes and regulations governing programs under which such federal awards are provided to that nonfederal entity.

In addition, the Amendments required federal departments and agencies:

  • To adopt by "common rule" the new single audit regulations issued by the Director of OMB (Circular A-133), and
  • To the maximum extent practical rely upon, and use, audit work performed pursuant to the Single Audit Act.

4.3.8.1.5

Definitions

Effective Date:

Mar. 1, 1999
 

Following are common definitions utilized in state and federal policies relating to the Single Audit process:

4.3.8.1.5.a

CFDA Number - The five-digit number assigned to a federal assistance program in the federal Catalog of Federal Domestic Assistance.

4.3.8.1.5.b

Cluster of Programs - A grouping of closely related programs that share common compliance requirements. Refer to Sections (5.2.2.3.1.f) and (5.2.2.3.1.i) for a definition and description of program clusters presently used by the state of Washington and its agencies and institutions.

4.3.8.1.5.c

Cognizant Federal Agency for Audit - The federal agency designated to carry out coordinating audit responsibilities identified in Circular A-133. Normally would be the primary awarding agency unless otherwise designated by OMB. Health & Human Services is the cognizant federal agency for the state of Washington Single Audit.

4.3.8.1.5.d

Cognizant State Agency - A state agency that has assumed the responsibility of implementing single audit requirements and coordinating audit follow-up for a particular grantee by virtue of providing the majority of federal assistance. In the event a state agency does not assume cognizant state agency responsibility, it is then the responsibility of each individual state grantor agency to implement and coordinate audit follow-up of single audit requirements.

4.3.8.1.5.e

Compliance Supplement - Refers to the Circular A-133 Compliance Supplement included as Appendix B to Circular A-133 or such documents as OMB or its designee may issue to replace it.

4.3.8.1.5.f

Corrective Action Plan - A plan of actions taken by an auditee that:

  • Corrects identified deficiencies developed during a single or program audit;
  • Produces recommended improvements; or
  • Demonstrates that audit findings are either invalid or do not warrant auditee action.

A corrective action plan includes the timetable for action and the identification of individuals responsible for seeing corrective action takes place.

4.3.8.1.5.g

Federal Award - Federal financial assistance and federal cost-reimbursement contracts that nonfederal entities receive directly from federal awarding agencies or indirectly from pass-through entities. It does not include procurement contracts, under grants or contracts, used to buy goods or services from vendors.

4.3.8.1.5.h

Federal Financial Assistance - Assistance that nonfederal entities receive or administer in the form of grants, loans, loan guarantees, property (including donated surplus property), cooperative agreements, interest subsidies, insurance, food commodities, direct appropriations or other assistance. It does not include amounts received for provision of vendor services to federal agencies or reimbursement for services rendered directly to individuals.

4.3.8.1.5.i

Federal Program - All federal awards to a nonfederal entity assigned a single number in the CFDA. When no CFDA number is assigned, all federal awards from the same agency made for the same purpose are to be combined and reported under a single XX.999 number.

4.3.8.1.5.j

Internal Control - A process, effected by an entity’s management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

  • Effectiveness and efficiency of operation;
  • Reliability of financial reporting; and
  • Compliance with applicable laws and regulations.

4.3.8.1.5.k

Local Government - Any unit of local government within a state including a county, borough, municipality, city, town, township, parish, local public authority, special district, school district, intrastate district, council of governments, and any other instrumentality of local government.

4.3.8.1.5.l

Major Program - A federal program determined by the auditor to be a major program in accordance with provisions in Circular A-133 or a federal program identified as major by a federal agency or pass-through entity in accordance with provisions in Circular A-133.

4.3.8.1.5.m

Management Decision - The evaluation by a federal awarding agency or pass-through entity of the audit findings and related corrective action plans and the issuance of a written decision as to what corrective action is necessary.

4.3.8.1.5.n

Nonfederal Entity - A state, local government or nonprofit organization.

4.3.8.1.5.o

Nonprofit Organization - Any corporation, trust, association, cooperative or other organization that:

  • Is operated primarily for scientific, educational, service, charitable or similar purposes in the public interest;
  • Is not organized primarily for profit; and
  • Uses its net proceeds to maintain, improve, or expand its operations.

The term nonprofit organization includes nonprofit institutions of higher education and hospitals.

4.3.8.1.5.p

Pass-Through Entity - A nonfederal entity that provides a federal award to a subrecipient to carry out a federal program.

4.3.8.1.5.q

Reporting Package - As defined in OMB Circular A-133 includes:

  • Entity’s financial statements and schedule of expenditures of federal awards,
  • Summary schedule of prior audit findings as discussed in the Circular,
  • Auditor’s reports as outlined in the Circular, and
  • Corrective action plan as discussed in the Circular.

4.3.8.1.5.r

Research and Development - All research activities, both basic and applied, and all development activities that are performed by a nonfederal entity.

  • Research is a systematic study directed toward fuller scientific knowledge or understanding of the subject studied. It also includes activities involving the training of individuals in research techniques where such activities utilize the same facilities as other research and development activities and where such activities are not included in the instruction function.
  • Development is the systematic use of knowledge and understanding gained from research directed to the production of useful materials, devices, systems, or methods, including design and development of prototypes and processes.

4.3.8.1.5.s

Single Audit - a financial, internal control, and compliance audit of a nonfederal entity administering of federal assistance awards including the financial statements of the entity.

4.3.8.1.5.t

Subrecipient - A nonfederal entity that expends federal awards received from a pass-through entity to carry out a federal program, but does not include an individual that is a beneficiary of such a program.

4.3.8.1.5.u

Vendor - A dealer, distributor, merchant, or other seller providing goods or services that are required for the conduct of a federal program.
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