§7502 Audit Requirements; Exemptions

Summary

Organizations that spend $300,000 or more in federal money in one fiscal year must have an audit. If they get funds from more than one federal program, they must have a single audit that follows the law and the Director’s guidance. If they get funds from only one federal program and are not already required to have a financial statement audit, they can choose a program-specific audit. Groups that spend less than $300,000 are exempt from these audit rules, but they still must keep records and let federal agencies or the Comptroller General see them. The Director will review the $300,000 threshold every 2 years and may change it, but never below $300,000. Audits are normally done each year, but some state or local governments (if their law required less frequent audits on January 1, 1987) and some nonprofits with a specific past history may do audits every two years that cover both years. Audits must be done by independent auditors using government auditing standards. Performance audits are not required unless the Director allows them. A single audit must cover the whole organization or a set of units that handled federal awards. Auditors must check the financial statements, the schedule of federal awards, internal controls for major programs, and whether the organization followed laws and rules that matter for those programs. Federal agencies must tell recipients the program names and rules, and must check audits to see if problems were fixed. Pass‑through entities must tell subrecipients the program names and rules, monitor their use of funds, review their audits, and allow necessary auditor access to records. Auditors must report results as the Director requires and include a short summary of findings on financial statements, controls, and compliance. The organization must send an electronic reporting package to a federal clearinghouse the Director names and make it public either within 30 days after getting the auditor’s report or, during a transition, within 13 months after the period audited; after that transition, within 9 months unless an agency allows more time when 9 months would be too hard. If the audit finds problems, the organization must send a corrective action plan or explain why none is needed, following the Comptroller General’s rules. The Director may run pilot projects to try other ways of meeting these rules after consulting certain congressional leaders.