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Federal OMB Proposes Significant Changes to Federal Grantee and Audit Requirements

March 06, 2013

Reed W. Risteen, CPA

On February 28, 2012, the federal Office of Management and Budget (OMB) issued an invitation to comment on a concepts document which outlined potential changes in federal grantee requirements and the federal single audit.  The purpose of the changes is to streamline grantee and audit requirements while maintaining accountability. That proposal was covered in our Spring 2012 newsletter

In follow up to the concepts document, on February 1, 2013 OMB issued Proposed OMB Uniform Guidance: Cost Principles, Audit and Administrative Requirements for Federal Awards, which is the prelude to a final document. OMB reviewed over 350 responses that were received on the concepts document in determining which concepts made sense.  Overall, the proposal represents a streamlining of requirements benefiting both grantees and auditors.

Currently there are three different OMB cost principle circulars and two administrative requirement circulars that are applicable to different types of grantees.  All of these circulars would be replaced by the OMB Uniform Guidance document, providing one set of cost principles and administrative requirements for all grantees except for-profit entities.  Federal single audit requirements are currently contained in a separate circular, which would also be replaced by the OMB Uniform Guidance document.

Virtually all of the current thresholds under the federal single audit would increase under the OMB Uniform Guidance document, including the following:












Federal single audit threshold (federal















Minimum major program threshold










Percentage of total expenditure coverage










   Low-risk grantees





   All other grantees










Floor for reporting questioned costs










Total potential testing categories for a





 federal major program






Another important change is the definition of high-risk programs, which are required to be tested. There are currently several factors that can make a program high risk, one of which is that every program above the major program threshold has to be tested at least once every three years. The OMB proposal only contains one criterion for high risk – that the program be tested in the prior year and found to have material non-compliance, a material weakness in controls over compliance or material questioned costs.  This change, along with the reduction in expenditure coverage percentages should lead to less federal programs being tested.

The original concept statement mentioned that OMB would be looking at potentially relaxing the current cost standards that require salary allocations to be supported by contemporaneous personal activity reports. The payroll allocation documentation requirements in the OMB Uniform Guidance document are largely unchanged from the current requirements, except it states that personnel dedicated 100% to a federal award must only document a semiannual “certification” rather than a personal activity report. The notice accompanying the OMB Uniform Guidance document states that OMB is considering whether there should be changes in the auditing requirements concerning testing allocated salaries.

The OMB is seeking comments on the proposal, and the comment period ends May 13, 2013. To find the complete text of the proposal and submit comments, go to and search for recent submissions by OMB to find docket OMB-2013-0001. The million dollar question is – when are these changes going to take effect? At this point OMB has been silent on the effective date.  Assuming OMB takes a few months to review the comments received and tinkers with the final wording, we are expecting an implementation beginning either with calendar 2013 year ends or, more likely,  June 30, 2014 year ends.

Please contact me at (860) 561-6848 or if you have any questions about the proposal and how it might affect your organization.


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