Pub.L. 104-157 To designate the United States Post Office building located at 102 South McLean, Lincoln, Illinois, as the ``Edward Madigan Post Office Building''. <> ...

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[[Page 1395]]

                   SINGLE AUDIT ACT AMENDMENTS OF 1996

[[Page 110 STAT. 1396]]

Public Law 104-156
104th Congress

                                 An Act


 
 To streamline and improve the effectiveness of chapter 75 of title 31, 
     United States Code (commonly referred to as the ``Single Audit 
              Act''). <<NOTE: July 5, 1996 -  [S. 1579]>> 

    Be it enacted by the Senate and House of Representatives of the 
United <<NOTE: Single Audit Act Amendments of 1996. 31 USC 7501 note.>>  
States of America in Congress assembled,

SECTION 1. SHORT TITLE; PURPOSES.

    (a) Short Title.--This Act may be cited as the ``Single Audit Act 
Amendments of 1996''.
    (b) Purposes.--The purposes of this Act are to--
            (1) promote sound financial management, including effective 
        internal controls, with respect to Federal awards administered 
        by non-Federal entities;
            (2) establish uniform requirements for audits of Federal 
        awards administered by non-Federal entities;
            (3) promote the efficient and effective use of audit 
        resources;
            (4) reduce burdens on State and local governments, Indian 
        tribes, and nonprofit organizations; and
            (5) ensure that Federal departments and agencies, to the 
        maximum extent practicable, rely upon and use audit work done 
        pursuant to chapter 75 of title 31, United States Code (as 
        amended by this Act).

SEC. 2. AMENDMENT TO TITLE 31, UNITED STATES CODE.

    Chapter 75 of title 31, United States Code, is amended to read as 
follows:

              ``CHAPTER 75--REQUIREMENTS FOR SINGLE AUDITS

``Sec.
``7501. Definitions.
``7502. Audit requirements; exemptions.
``7503. Relation to other audit requirements.
``7504. Federal agency responsibilities and relations with non-Federal 
           entities.
``7505. Regulations.
``7506. Monitoring responsibilities of the Comptroller General.
``7507. Effective date.

``Sec. 7501. Definitions

    ``(a) As used in this chapter, the term--
            ``(1) `Comptroller General' means the Comptroller General of 
        the United States;
            ``(2) `Director' means the Director of the Office of 
        Management and Budget;
            ``(3) `Federal agency' has the same meaning as the term 
        `agency' in section 551(1) of title 5;

[[Page 110 STAT. 1397]]

            ``(4) `Federal awards' means Federal financial assistance 
        and Federal cost-reimbursement contracts that non-Federal 
        entities receive directly from Federal awarding agencies or 
        indirectly from pass-through entities;
            ``(5) `Federal financial assistance' means assistance that 
        non-Federal entities receive or administer in the form of 
        grants, loans, loan guarantees, property, cooperative 
        agreements, interest subsidies, insurance, food commodities, 
        direct appropriations, or other assistance, but does not include 
        amounts received as reimbursement for services rendered to 
        individuals in accordance with guidance issued by the Director;
            ``(6) `Federal program' means all Federal awards to a non-
        Federal entity assigned a single number in the Catalog of 
        Federal Domestic Assistance or encompassed in a group of numbers 
        or other category as defined by the Director;
            ``(7) `generally accepted government auditing standards' 
        means the government auditing standards issued by the 
        Comptroller General;
            ``(8) `independent auditor' means--
                    ``(A) an external State or local government auditor 
                who meets the independence standards included in 
                generally accepted government auditing standards; or
                    ``(B) a public accountant who meets such 
                independence standards;
            ``(9) `Indian tribe' means any Indian tribe, band, nation, 
        or other organized group or community, including any Alaskan 
        Native village or regional or village corporation (as defined 
        in, or established under, the Alaskan Native Claims Settlement 
        Act) that is recognized by the United States as eligible for the 
        special programs and services provided by the United States to 
        Indians because of their status as Indians;
            ``(10) `internal controls' means 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:
                    ``(A) Effectiveness and efficiency of operations.
                    ``(B) Reliability of financial reporting.
                    ``(C) Compliance with applicable laws and 
                regulations;
            ``(11) `local government' means 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, any other instrumentality of local government and, 
        in accordance with guidelines issued by the Director, a group of 
        local governments;
            ``(12) `major program' means a Federal program identified in 
        accordance with risk-based criteria prescribed by the Director 
        under this chapter, subject to the limitations described under 
        subsection (b);
            ``(13) `non-Federal entity' means a State, local government, 
        or nonprofit organization;
            ``(14) `nonprofit organization' means any corporation, 
        trust, association, cooperative, or other organization that--
                    ``(A) is operated primarily for scientific, 
                educational, service, charitable, or similar purposes in 
                the public interest;
                    ``(B) is not organized primarily for profit; and

[[Page 110 STAT. 1398]]

                    ``(C) uses net proceeds to maintain, improve, or 
                expand the operations of the organization;
            ``(15) `pass-through entity' means a non-Federal entity that 
        provides Federal awards to a subrecipient to carry out a Federal 
        program;
            ``(16) `program-specific audit' means an audit of one 
        Federal program;
            ``(17) `recipient' means a non-Federal entity that receives 
        awards directly from a Federal agency to carry out a Federal 
        program;
            ``(18) `single audit' means an audit, as described under 
        section 7502(d), of a non-Federal entity that includes the 
        entity's financial statements and Federal awards;
            ``(19) `State' means any State of the United States, the 
        District of Columbia, the Commonwealth of Puerto Rico, the 
        Virgin Islands, Guam, American Samoa, the Commonwealth of the 
        Northern Mariana Islands, and the Trust Territory of the Pacific 
        Islands, any instrumentality thereof, any multi-State, regional, 
        or interstate entity which has governmental functions, and any 
        Indian tribe; and
            ``(20) `subrecipient' means a non-Federal entity that 
        receives Federal awards through another non-Federal entity to 
        carry out a Federal program, but does not include an individual 
        who receives financial assistance through such awards.

    ``(b) In prescribing risk-based program selection criteria for major 
programs, the Director shall not require more programs to be identified 
as major for a particular non-Federal entity, except as prescribed under 
subsection (c) or as provided under subsection (d), than would be 
identified if the major programs were defined as any program for which 
total expenditures of Federal awards by the non-Federal entity during 
the applicable year exceed--
            ``(1) the larger of $30,000,000 or 0.15 percent of the non-
        Federal entity's total Federal expenditures, in the case of a 
        non-Federal entity for which such total expenditures for all 
        programs exceed $10,000,000,000;
            ``(2) the larger of $3,000,000, or 0.30 percent of the non-
        Federal entity's total Federal expenditures, in the case of a 
        non-Federal entity for which such total expenditures for all 
        programs exceed $100,000,000 but are less than or equal to 
        $10,000,000,000; or
            ``(3) the larger of $300,000, or 3 percent of such total 
        Federal expenditures for all programs, in the case of a non-
        Federal entity for which such total expenditures for all 
        programs equal or exceed $300,000 but are less than or equal to 
        $100,000,000.

    ``(c) When the total expenditures of a non-Federal entity's major 
programs are less than 50 percent of the non-Federal entity's total 
expenditures of all Federal awards (or such lower percentage as 
specified by the Director), the auditor shall select and test additional 
programs as major programs as necessary to achieve audit coverage of at 
least 50 percent of Federal expenditures by the non-Federal entity (or 
such lower percentage as specified by the Director), in accordance with 
guidance issued by the Director.
    ``(d) Loan or loan guarantee programs, as specified by the Director, 
shall not be subject to the application of subsection (b).

[[Page 110 STAT. 1399]]

``Sec. 7502. Audit requirements; exemptions

    ``(a)(1)(A) Each non-Federal entity that expends a total amount of 
Federal awards equal to or in excess of $300,000 or such other amount 
specified by the Director under subsection (a)(3) in any fiscal year of 
such non-Federal entity shall have either a single audit or a program-
specific audit made for such fiscal year in accordance with the 
requirements of this chapter.
    ``(B) Each such non-Federal entity that expends Federal awards under 
more than one Federal program shall undergo a single audit in accordance 
with the requirements of subsections (b) through (i) of this section and 
guidance issued by the Director under section 7505.
    ``(C) Each such non-Federal entity that expends awards under only 
one Federal program and is not subject to laws, regulations, or Federal 
award agreements that require a financial statement audit of the non-
Federal entity, may elect to have a program-specific audit conducted in 
accordance with applicable provisions of this section and guidance 
issued by the Director under section 7505.
    ``(2)(A) Each non-Federal entity that expends a total amount of 
Federal awards of less than $300,000 or such other amount specified by 
the Director under subsection (a)(3) in any fiscal year of such entity, 
shall be exempt for such fiscal year from compliance with--
            ``(i) the audit requirements of this chapter; and
            ``(ii) any applicable requirements concerning financial 
        audits contained in Federal statutes and regulations governing 
        programs under which such Federal awards are provided to that 
        non-Federal entity.

    ``(B) The provisions of subparagraph (A)(ii) of this paragraph shall 
not exempt a non-Federal entity from compliance with any provision of a 
Federal statute or regulation that requires such non-Federal entity to 
maintain records concerning Federal awards provided to such non-Federal 
entity or that permits a Federal agency, pass-through entity, or the 
Comptroller General access to such records.
    ``(3) Every 2 years, the Director shall review the amount for 
requiring audits prescribed under paragraph (1)(A) and may adjust such 
dollar amount consistent with the purposes of this chapter, provided the 
Director does not make such adjustments below $300,000.
    ``(b)(1) Except as provided in paragraphs (2) and (3), audits 
conducted pursuant to this chapter shall be conducted annually.
    ``(2) A State or local government that is required by constitution 
or statute, in effect on January 1, 1987, to undergo its audits less 
frequently than annually, is permitted to undergo its audits pursuant to 
this chapter biennially. Audits conducted biennially under the 
provisions of this paragraph shall cover both years within the biennial 
period.
    ``(3) Any nonprofit organization that had biennial audits for all 
biennial periods ending between July 1, 1992, and January 1, 1995, is 
permitted to undergo its audits pursuant to this chapter biennially. 
Audits conducted biennially under the provisions of this paragraph shall 
cover both years within the biennial period.
    ``(c) Each audit conducted pursuant to subsection (a) shall be 
conducted by an independent auditor in accordance with generally 
accepted government auditing standards, except that, for the

[[Page 110 STAT. 1400]]

purposes of this chapter, performance audits shall not be required 
except as authorized by the Director.
    ``(d) Each single audit conducted pursuant to subsection (a) for any 
fiscal year shall--
            ``(1) cover the operations of the entire non-Federal entity; 
        or
            ``(2) at the option of such non-Federal entity such audit 
        shall include a series of audits that cover departments, 
        agencies, and other organizational units which expended or 
        otherwise administered Federal awards during such fiscal year 
        provided that each such audit shall encompass the financial 
        statements and schedule of expenditures of Federal awards for 
        each such department, agency, and organizational unit, which 
        shall be considered to be a non-Federal entity.

    ``(e) The auditor shall--
            ``(1) determine whether the financial statements are 
        presented fairly in all material respects in conformity with 
        generally accepted accounting principles;
            ``(2) determine whether the schedule of expenditures of 
        Federal awards is presented fairly in all material respects in 
        relation to the financial statements taken as a whole;
            ``(3) with respect to internal controls pertaining to the 
        compliance requirements for each major program--
                    ``(A) obtain an understanding of such internal 
                controls;
                    ``(B) assess control risk; and
                    ``(C) perform tests of controls unless the controls 
                are deemed to be ineffective; and
            ``(4) determine whether the non-Federal entity has complied 
        with the provisions of laws, regulations, and contracts or 
        grants pertaining to Federal awards that have a direct and 
        material effect on each major program.

    ``(f)(1) Each Federal agency which provides Federal awards to a 
recipient shall--
            ``(A) provide such recipient the program names (and any 
        identifying numbers) from which such awards are derived, and the 
        Federal requirements which govern the use of such awards and the 
        requirements of this chapter; and
            ``(B) review the audit of a recipient as necessary to 
        determine whether prompt and appropriate corrective action has 
        been taken with respect to audit findings, as defined by the 
        Director, pertaining to Federal awards provided to the recipient 
        by the Federal agency.

    ``(2) Each pass-through entity shall--
            ``(A) provide such subrecipient the program names (and any 
        identifying numbers) from which such assistance is derived, and 

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