Man Signing Paper

The Office and Management and Budget issued updated proposed guidance and is seeking public comment on its ideas to reform Circular A-133 and other grants management requirements.

OMB Proposes Major Changes to Circular A-133 and Other Grants Management Requirements

  • 2/12/2013

In early 2012, the Office of Management and Budget (OMB) sought public comment on its ideas to reform Circular A-133 and other grants management areas. Based on the feedback the agency received, the OMB recently issued updated proposed guidance, which is now available for review and public comment.

The proposed changes attempt to make the most of taxpayer dollars by streamlining grant-making and ensuring financial integrity while delivering the right program outcomes.

“There are multiple revisions proposed that affect audit requirements under Circular A-133, and that could significantly impact the way single audits are performed and grants management is conducted. Organizations affected by these requirements should closely review the guidance and provide feedback to the OMB,” says Rachel Flanders, a public sector partner with CliftonLarsonAllen.

The document proposes several major changes:

Increases in single audit and major program thresholds

  • The audit threshold is raised from $500,000 to $750,000 of federal expenditures.
  • The Type A program threshold is increased from $300,000 to $500,000.
  • The percentage coverage of federal expenditures required for testing is decreased from 50 percent to 40 percent for regular auditees, and from 25 percent to 20 percent for low-risk auditees.

Changes to major program determination process

  • Updated criteria for high-risk Type A programs, including failure to have an unqualified opinion on the program, a material weakness in internal controls, or questioned costs exceeding 5 percent of the program’s expenditures.
  • Reduction in the number of high-risk Type B programs that must be tested from one-half to at least one-fourth of low-risk Type A programs.

Reduction of compliance requirements subject to testing

  • Compliance requirements subject to testing would be streamlined, with some requirements removed. They would be limited to the following areas:
    • Activities allowed or not allowed and allowable costs/cost principles
    • Cash management
    • Eligibility
    • Period of availability of federal funds
    • Matching
    • Reporting
    • Subrecipient monitoring
    • Special tests and provisions
  • Compliance requirements removed from testing would be:
    • Davis-Bacon Act
    • Equipment and real property management
    • Level of effort and earmarking
    • Procurement, suspension, and debarment
    • Program income
    • Real property acquisition and relocation assistance
  • The OMB will consider requests from agencies to add back certain compliance provisions where these requirements are essential to the program as special tests and provisions.

Reforms to cost principles

There are several reforms proposed, including:

  • Consolidation of cost principles in Circulars A-21, A-87, and A-122 into a single document with limited variations
  • Indirect cost changes, including:
    • Extending negotiated indirect cost rates for up to four years
    • Allowing an indirect cost minimum flat rate of 10 percent for entities that don’t yet have the capacity for a full negotiation for no more than four years
    • Requiring pass-through entities to either honor the indirect cost rate, negotiate a rate in accordance with federal guidelines, or provide the minimum flat rate
  • Alternatives to time-and-effort reporting requirements

Other changes

  • Creation of a consolidated, uniform set of administrative requirements
  • Streamlining related circulars and guidance — including the eight existing OMB circulars into one document
  • Various other changes that may apply to certain types of entities or grants

How we can help

CliftonLarsonAllen will review this guidance closely and provide feedback on these proposed changes. We encourage our clients to let us know their thoughts on the proposed guidance.

The deadline for providing feedback to the OMB is May 2, 2013.

Rachel Flanders, Public Sector Partner or 612-397-3027