Question

Under a single audit, what are Type A and Type B programs? Which are required to be audited in the context of a single audit?

Answer 1

Q- Under a single audit, what are Type A and Type B programs?

To determine which federal programs to audit under the compliance audit, federal assistance expended by the recipient (also called federal expenditures) during one year is identified by federal program name, Federal agency and CFDA number. These federal expenditures are then combined to determine the total amount expended during the year. Any recipient whose total federal expenditures during a year equal or exceed $750,000 requires a Single Audit. If the recipient does not meet this threshold, a Single Audit is not required, although the recipient may elect to have a program-specific audit (an audit of a single federal program, without auditing the entire entity). Once this determination is performed, 2 CFR 200.518 requires that federal programs be categorized in two groups: Type A programs and Type B programs.

Type A program – a Type A program is any federal program within a recipient that meets the following criteria:

If total federal awards expended during the audit period are greater than or equal to $750,000 and less than or equal to $25 million, then any program that expends more than $750,000 is Type A.

If total federal awards expended during the audit period are greater than $25 million and less than or equal to $100 million, then any program that expends more than 3% of total federal awards is Type A.

If total federal awards expended during the audit period are greater than $100 million and less than or equal to $1 billion, then any program that expends more than $3 million is Type A.

If total federal awards expended during the audit period are greater than $1 billion and less than or equal to $10 billion, then any program that expends more than 0.3% of total federal awards is Type A.

If total federal awards expended during the audit period are greater than $10 billion and less than or equal to $20 billion, then any program that expends more than $30 million is Type A.

If total federal awards expended during the audit period are greater than $20 billion, then any program that expends more than 0.15% of total federal awards is Type A.

In other words, if a recipient expended a total of $25 million or less in federal assistance, then any single program which expended $750,000 or more is considered a Type A. If a recipient expended $30 million in federal assistance, then any single program which expended $900,000 or more (3% × $30,000,000) is considered a Type A program. Special consideration must be given to large loan programs in determining the Type A threshold.

Type B program – A Type B program is any single program which does not meet the Type A requirements.

Example 1 – The City of Example operates a Section 8 program, and expended $950,000 in Section 8 funds and $5,000,000 of total federal assistance during the year. Since this amount does not exceed $25,000,000, the Section 8 program is considered a Type A program because $950,000 exceeds the $750,000 threshold.

Example 2 – Using the same data in Example 1 with the exception that the City of Example now expended a total of $30,000,000 in federal assistance, the Section 8 program would meet the Type A threshold because $950,000 is greater than $30,000,000 x 3% ($900,000).

Example 3 – Using the same data in Example 1 with the exception that the City of Example now expended a total of $100,000,000 in federal assistance, the Section 8 program would not meet the Type A threshold because $950,000 is less than $3 million, and would be considered a Type B program.

Q- Which are required to be audited in the context of a single audit?

In the United States, the Single Audit, Subpart F of the OMB Uniform Guidance, is a rigorous, organization-wide audit or examination of an entity that expends $750,000 or more of federal assistance (commonly known as federal funds, federal grants, or federal awards) received for its operations. Usually performed annually, the Single Audit's objective is to provide assurance to the US federal government as to the management and use of such funds by recipients such as states, cities, universities, non-profit organizations, and Indian Tribes. The audit is typically performed by an independent certified public accountant (CPA) and encompasses both financial and compliance components. The Single Audits must be submitted to the Federal Audit Clearinghouse along with a data collection form, Form SF-SAC.

Purpose

The federal government provides an extensive array of federal assistance to recipients reaching over $400 billion annually. This assistance is provided through thousands of individual grants and awards annually for the purpose of benefiting the general public in the areas of education, health, public safety, welfare, and public works, among others. However, as a condition of receiving this assistance recipients must comply with applicable federal and state laws and regulations, as well as any particular provisions tied with the specific assistance. The Single Audit provides the Federal government with assurance that these recipients comply with such directives by having an independent external source (the CPA) report on such compliance. However, it only applies to state, local government, and nonprofit recipients that expend $750,000 or more of such assistance in one year.

A Single Audit encompasses an examination of a recipient's financial records, financial statements, federal award transactions and expenditures, the general management of its operations, internal control systems, and federal assistance it received during the audit period (the time period of recipient operations examined in the Single Audit, which is usually covers a natural or fiscal year). The Single Audit is divided into two areas: Compliance and Financial.

The compliance component of a Single Audit covers the study and understanding (planning stage) as well as the testing and evaluation (exam stage) of the recipient with respect to federal assistance usage, operations and compliance with laws and regulations. The financial component is exactly like a financial audit of a non-federal entity which includes the audit of the financial statements and accompanying notes. Depending on the recipient, the Single Audit can be simple and straightforward, or it could be complex and troublesome. This is because there are millions of federal grants awarded each year to thousands of recipients, each with its own independent way of operating. Therefore, the Single Audit differs from recipient to recipient and from federal program to program.