Circular A-133

Purpose: This Circular is issued pursuant to the Single Audit Act of 1984, P.L. 98-501, and the Single Audit Act Amendments of 1996., P.L. 104-156. It sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of States, local governments, and non-profit organizations expending Federal awards.

 Audit required. Non-Federal entities that expend $300,000 (%500,000 for fiscal years ending after December 31, 2003) or more in a year in Federal awards shall have a single or program-specific audit conducted for that year in accordance with the provisions of this part.  

Single audit. Non -Federal entities that expend $300,000 (%500,000 for fiscal years ending after December 31, 2003) or more in a year in Federal awards shall have a single audit conducted in accordance with ___.500 except when they elect to have a program-specific audit conducted in accordance with paragraph (c) of this section. Program-specific audit election. When an auditee expends Federal awards under only Federal program (excluding R&D) and the Federal program's laws, regulations, or grant agreements do not require a financial statement audit of the auditee, the auditee may elect to have a program-specific audit conducted. A program-specific audit may not be elected for R&D unless all of the Federal awards expended were received from the same Federal agency, or the same Federal agency and the same pass-through entity, and that Federal agency, or pass-through entity in the case of a subrecipient, approves, in advance a program-specific audit.

Subrecipient and vendor determinations.
An auditee may be a recipient, a subrecipient, and a vendor.  Federal awards expended as a recipient or a subrecipient would be subject to audit under this part.  The payments received for goods or services provided as a vendor would not be considered Federal awards.  The guidance of this section should be considered in determining whether payments constitute a Federal award or a payment for goods and services.

Federal award.  Characteristics indicative of a Federal award received by a subrecipient are when the organization:

• Determines who is eligible to receive what Federal financial assistance;
• Has its performance measured against whether the objectives of the Federal program are met;
• Has responsibility for programmatic decision making;
• Has responsibility for adherence to applicable Federal program compliance requirements; and
• Uses the Federal funds to carry out a program of the organization as compared to providing goods or services for a program of the pass-through entity.

Payment for goods and services. (VENDOR) Characteristics indicative of a payment for goods and services received by a vendor are when the organization:

• Provides the goods and services within normal business operations;
• Provides similar goods or services to many different purchasers;
• Operates in a competitive environment;
• Provides goods or services that are ancillary to the operation of the Federal program; and
• Is not subject to compliance requirements of the Federal program. 

Use of judgment in making determination.  There may be unusual circumstances or exceptions to the listed characteristics.  In making the determination of whether a subrecipient or vendor relationship exists, the substance of the relationship is more important than the form of the agreement.  It is not expected that all of the characteristics will be present and judgment should be used in determining whether an entity is a subrecipient or vendor.

For-profit subrecipient. Since this part does not apply to for-profit subrecipients, the pass-through entity is responsible for establishing requirements, as necessary, to ensure compliance by for-profit subrecipients.  The contract with the for-profit subrecipient should describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility.  Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits., monitoring during the contract, and post-award audits.

Compliance responsibility for vendors.  In most cases, the auditee's compliance responsibility for vendors is only to ensure that the procurement, recipient, and payment for goods and services comply with laws, regulations, and the provisions of contracts or grant agreements.  Program compliance requirements normally do not pass through to vendors.  However, the auditee is responsible for ensuring compliance for vendor transactions which are structured such that the vendor is responsibility for program compliance.  Also, when these vendor transactions relate to a major program, the scope of the audit shall include determining whether these transactions are in compliance with laws, regulations, and the provisions of contracts or grant agreements.