31 U.S.C. § 7502 — Audit requirements; exemptions

Page 567 TITLE 31—MONEY AND FINANCE § 7502 TENNESSEE VALLEY AUTHORITY AUDITS UNAFFECTED BY SINGLE AUDIT REQUIREMENTS Pub. L. 98–502, § 2(b), Oct. 19, 1984, 98 Stat. 2334, pro- vided that: ‘‘The provisions of this Act [enacting this chapter and provisions set out as notes under this sec- tion] shall not diminish or otherwise affect the author- ity of the Tennessee Valley Authority to conduct its own audits of any matter involving funds disbursed by the Tennessee Valley Authority.’’ Executive Documents TERMINATION OF TRUST TERRITORY OF THE PACIFIC ISLANDS For termination of Trust Territory of the Pacific Is- lands, see note set out preceding section 1681 of Title 48, Territories and Insular Possessions. § 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 accord- ance 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 state- ment 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 fis- cal 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 con- cerning 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 re- quired by constitution or statute, in effect on January 1, 1987, to undergo its audits less fre- quently than annually, is permitted to undergo its audits pursuant to this chapter biennially. Audits conducted biennially under the provi- sions of this paragraph shall cover both years within the biennial period. (3) Any nonprofit organization that had bien- nial audits for all biennial periods ending be- tween July 1, 1992, and January 1, 1995, is per- mitted 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 sub- section (a) shall be conducted by an independent auditor in accordance with generally accepted government auditing standards, except that, for the 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 organi- zational units which expended or otherwise ad- ministered Federal awards during such fiscal year provided that each such audit shall en- compass 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 state- ments are presented fairly in all material re- spects in conformity with generally accepted accounting principles; (2) determine whether the schedule of ex- penditures of Federal awards is presented fair- ly in all material respects in relation to the fi- nancial statements taken as a whole; (3) with respect to internal controls per- taining to the compliance requirements for each major program— (A) obtain an understanding of such inter- nal 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 enti- ty has complied with the provisions of laws, regulations, and contracts or grants per- taining to Federal awards that have a direct and material effect on each major program. (f)(1) Each Federal agency which provides Fed- eral awards to a recipient shall— (A) provide such recipient the program names (and any identifying numbers) from which such awards are derived, and the Fed- eral requirements which govern the use of such awards and the requirements of this chapter; and (B) review the audit of a recipient as nec- essary to determine whether prompt and ap- propriate corrective action has been taken Page 568 TITLE 31—MONEY AND FINANCE § 7502 with respect to audit findings, as defined by the Director, pertaining to Federal awards provided to the recipient by the Federal agen- cy. (2) Each pass-through entity shall— (A) provide such subrecipient the program names (and any identifying numbers) from which such assistance is derived, and the Fed- eral requirements which govern the use of such awards and the requirements of this chapter; (B) monitor the subrecipient’s use of Federal awards through site visits, limited scope au- dits, or other means; (C) review the audit of a subrecipient as nec- essary to determine whether prompt and ap- propriate corrective action has been taken with respect to audit findings, as defined by the Director, pertaining to Federal awards provided to the subrecipient by the pass- through entity; and (D) require each of its subrecipients of Fed- eral awards to permit, as a condition of receiv- ing Federal awards, the independent auditor of the pass-through entity to have such access to the subrecipient’s records and financial state- ments as may be necessary for the pass- through entity to comply with this chapter. (g)(1) The auditor shall report on the results of any audit conducted pursuant to this section, in accordance with guidance issued by the Direc- tor. (2) When reporting on any single audit, the auditor shall include a summary of the auditor’s results regarding the non-Federal entity’s finan- cial statements, internal controls, and compli- ance with laws and regulations. (h) The non-Federal entity shall transmit the reporting package, in an electronic form in ac- cordance with the data standards established under chapter 64 and which shall include the non-Federal entity’s financial statements, schedule of expenditures of Federal awards, cor- rective action plan defined under subsection (i), and auditor’s reports developed pursuant to this section, to a Federal clearinghouse designated by the Director, and make it available for public inspection within the earlier of— (1) 30 days after receipt of the auditor’s re- port; or (2)(A) for a transition period of at least 2 years after the effective date of the Single Audit Act Amendments of 1996, as established by the Director, 13 months after the end of the period audited; or (B) for fiscal years beginning after the pe- riod specified in subparagraph (A), 9 months after the end of the period audited, or within a longer timeframe authorized by the Federal agency, determined under criteria issued under section 7504, when the 9-month time- frame would place an undue burden on the non-Federal entity. (i) If an audit conducted pursuant to this sec- tion discloses any audit findings, as defined by the Director, including material noncompliance with individual compliance requirements for a major program by, or reportable conditions in the internal controls of, the non-Federal entity with respect to the matters described in sub- section (e), the non-Federal entity shall submit to Federal officials designated by the Director, a plan for corrective action to eliminate such audit findings or reportable conditions or a statement describing the reasons that corrective action is not necessary. Such plan shall be con- sistent with the audit resolution standard pro- mulgated by the Comptroller General (as part of the standards for internal controls in the Fed- eral Government) pursuant to section 3512(c). (j) The Director may authorize pilot projects to test alternative methods of achieving the purposes of this chapter. Such pilot projects may begin only after consultation with the Chair and Ranking Minority Member of the Committee on Governmental Affairs of the Sen- ate and the Chair and Ranking Minority Mem- ber of the Committee on Government Reform and Oversight of the House of Representatives. (Added Pub. L. 98–502, § 2(a), Oct. 19, 1984, 98 Stat. 2329; amended Pub. L. 103–272, § 4(f)(1)(W), July 5, 1994, 108 Stat. 1363; Pub. L. 104–156, § 2, July 5, 1996, 110 Stat. 1399; Pub. L. 116–103, § 5(a)(1), Dec. 30, 2019, 133 Stat. 3270.) Editorial Notes REFERENCES IN TEXT The effective date of the Single Audit Act Amend- ments of 1996, referred to in subsec. (h)(2)(A), is the ef- fective date of Pub. L. 104–156, which is classified gen- erally to this chapter. See section 7506 of this title. AMENDMENTS 2019—Subsec. (h). Pub. L. 116–103 inserted ‘‘in an elec- tronic form in accordance with the data standards es- tablished under chapter 64 and’’ after ‘‘the reporting package,’’ in introductory provisions. 1996—Pub. L. 104–156 reenacted section catchline without change and amended text generally, sub- stituting present provisions for similar provisions re- lating to audit requirements and exemptions from such requirements for State and local governments receiv- ing Federal financial assistance of $100,000 or more in any fiscal year and requiring audits to be conducted an- nually in most instances, to cover entirety of govern- ment operations, for reports to be made on audits in specified time period, and for appropriate corrective ac- tion plans to be submitted to Federal officials for any material State or local noncompliance with Federal laws and regulations. 1994—Subsec. (b)(2). Pub. L. 103–272, § 4(f)(1)(W), sub- stituted ‘‘October 19, 1984’’ for ‘‘the date of enactment of this chapter’’ in subpar. (A) and for ‘‘such date’’ in subpar. (B). Subsec. (d)(5), (6). Pub. L. 103–272, § 4(f)(1)(W)(iii), re- designated par. (6) as (5) and struck out former par. (5) which read as follows: ‘‘Each State or local government which, in any fiscal year of such government, receives directly from the Department of the Treasury a total of $25,000 or more under chapter 67 of this title (relating to general revenue sharing) and which is required to conduct an audit pursuant to this chapter for such fis- cal year shall not have the option provided by para- graph (1)(A) for such fiscal year.’’ Subsec. (g). Pub. L. 103–272, § 4(f)(1)(W)(iv), substituted ‘‘section 3512(c)’’ for ‘‘section 3512(b)’’. Statutory Notes and Related Subsidiaries CHANGE OF NAME Committee on Governmental Affairs of Senate changed to Committee on Homeland Security and Gov- ernmental Affairs of Senate, effective Jan. 4, 2005, by Senate Resolution No. 445, One Hundred Eighth Con- gress, Oct. 9, 2004. Page 569 TITLE 31—MONEY AND FINANCE § 7504 Committee on Government Reform and Oversight of House of Representatives changed to Committee on Government Reform of House of Representatives by House Resolution No. 5, One Hundred Sixth Congress, Jan. 6, 1999. Committee on Government Reform of House of Representatives changed to Committee on Oversight and Government Reform of House of Rep- resentatives by House Resolution No. 6, One Hundred Tenth Congress, Jan. 5, 2007. Committee on Oversight and Government Reform of House of Representatives changed to Committee on Oversight and Reform of House of Representatives by House Resolution No. 6, One Hundred Sixteenth Congress, Jan. 9, 2019. Com- mittee on Oversight and Reform of House of Represent- atives changed to Committee on Oversight and Ac- countability of House of Representatives by House Res- olution No. 5, One Hundred Eighteenth Congress, Jan. 9, 2023. § 7503. Relation to other audit requirements (a) An audit conducted in accordance with this chapter shall be in lieu of any financial audit of Federal awards which a non-Federal entity is re- quired to undergo under any other Federal law or regulation. To the extent that such audit pro- vides a Federal agency with the information it requires to carry out its responsibilities under Federal law or regulation, a Federal agency shall rely upon and use that information. (b) Notwithstanding subsection (a), a Federal agency may conduct or arrange for additional audits which are necessary to carry out its re- sponsibilities under Federal law or regulation. The provisions of this chapter do not authorize any non-Federal entity (or subrecipient thereof) to constrain, in any manner, such agency from carrying out or arranging for such additional audits, except that the Federal agency shall plan such audits to not be duplicative of other audits of Federal awards. (c) The provisions of this chapter do not limit the authority of Federal agencies to conduct, or arrange for the conduct of, audits and evalua- tions of Federal awards, nor limit the authority of any Federal agency Inspector General or other Federal official. (d) Subsection (a) shall apply to a non-Federal entity which undergoes an audit in accordance with this chapter even though it is not required by section 7502(a) to have such an audit. (e) A Federal agency that provides Federal awards and conducts or arranges for audits of non-Federal entities receiving such awards that are in addition to the audits of non-Federal enti- ties conducted pursuant to this chapter shall, consistent with other applicable law, arrange for funding the full cost of such additional audits. Any such additional audits shall be coordinated with the Federal agency determined under cri- teria issued under section 7504 to preclude dupli- cation of the audits conducted pursuant to this chapter or other additional audits. (f) Upon request by a Federal agency or the Comptroller General, any independent auditor conducting an audit pursuant to this chapter shall make the auditor’s working papers avail- able to the Federal agency or the Comptroller General as part of a quality review, to resolve audit findings, or to carry out oversight respon- sibilities consistent with the purposes of this chapter. Such access to auditor’s working pa- pers shall include the right to obtain copies. (Added Pub. L. 98–502, § 2(a), Oct. 19, 1984, 98 Stat. 2332; amended Pub. L. 103–272, § 4(f)(1)(X), July 5, 1994, 108 Stat. 1363; Pub. L. 104–156, § 2, July 5, 1996, 110 Stat. 1401.) Editorial Notes AMENDMENTS 1996—Pub. L. 104–156 reenacted section catchline without change and amended text generally, sub- stituting present provisions for similar provisions re- lating to other audit requirements, including compli- ance and evaluation audits of individual Federal assist- ance programs, audits by State and local governmental entities, and provisions requiring Federal agencies to arrange for funding cost of conducting audits that are in addition to audits required by this chapter. 1994—Subsec. (a). Pub. L. 103–272 substituted ‘‘extent’’ for ‘‘extend’’ in second sentence. § 7504. Federal agency responsibilities and rela- tions with non-Federal entities (a) Each Federal agency shall, in accordance with guidance issued by the Director under sec- tion 7505, with regard to Federal awards pro- vided by the agency— (1) monitor non-Federal entity use of Fed- eral awards; (2) assess the quality of audits conducted under this chapter for audits of entities for which the agency is the single Federal agency determined under subsection (b); (3) participate in and furnish information for the review under subsection (e); and (4) identify recipients that expend $300,000 or more in Federal awards or such other amount specified by the Director under section 7502(a)(3) during the recipient’s fiscal year but did not undergo an audit in accordance with this chapter. (b) Each non-Federal entity shall have a single Federal agency, determined in accordance with criteria established by the Director, to provide the non-Federal entity with technical assistance and assist with implementation of this chapter. (c) The Director shall designate a Federal clearinghouse to— (1) receive copies of all reporting packages developed in accordance with this chapter; and (2) perform analyses to assist the Director in carrying out responsibilities under this chap- ter. (d) Not later than 2 years after the date of en- actment of this subsection, and every 2 years thereafter, the Director shall submit to the Committee on Homeland Security and Govern- mental Affairs of the Senate and the Committee on Oversight and Accountability of the House of Representatives a report listing the recipients identified under subsection (a)(4). (e)(1) The Director shall designate 1 or more Federal agencies to conduct a Government-wide analysis of single audit quality, which may in- clude a consideration of the results of reviews of single audit quality by— (A) Federal agencies; (B) inspectors general of Federal agencies; (C) State auditors; and (D) external peer reviews conducted in ac- cordance with generally accepted government auditing standards. (2) Not later than 3 years after the date of en- actment of this subsection, and every 6 years