§7502 Audit Requirements; Exemptions

Summary

Groups (like states, local governments, nonprofits, or other non-Federal entities) that spend $300,000 or more in federal money in a fiscal year must get an audit. If they spend money from more than one federal program, the audit must be a single audit that covers the whole entity. If they spend money from only one federal program and are not already required to have a financial audit by law, they can choose a program-specific audit instead. The Director reviews the $300,000 threshold every 2 years and can raise it, but never lower it below $300,000. Audits are normally done every year. Some governments that were allowed to audit less often on January 1, 1987, and some nonprofits with certain past biennial audit histories (periods ending between July 1, 1992, and January 1, 1995) may audit every two years. An independent auditor must use government auditing standards. The auditor checks the financial statements, the list of federal spending, internal controls for major programs, and whether the entity followed federal rules. Federal agencies and pass-through entities must tell recipients which programs and rules apply, look at audits, and, for pass-throughs, monitor subrecipients and let auditors access records. Auditors must report results as the Director requires. The entity must send an electronic reporting package to a federal clearinghouse and make it public either within 30 days after getting the auditor’s report or by set deadlines (13 months after the audit period during a transition period after the 1996 Amendments, then 9 months afterward). If problems are found, the entity must give federal officials a corrective action plan or explain why none is needed. The Director may test pilot projects after consulting leaders of the Senate Governmental Affairs Committee and the House Government Reform and Oversight Committee.