What’s the Answer to the $2 Million Question?

September 7, 2011 | By Jerry Ashworth | 1 comment

Although some of our blog posts may not actually spur anyone to respond, here’s a $2 million topic ripe for controversy that just begs for comments, which actually could prove quite useful for federal decisionmakers.

A workgroup of federal, state and local officials evaluating ways to reduce improper payments submitted its recommendations last month to the Office of Management and Budget, Kinney Poynter, executive director of the National Association of State Auditors, Comptrollers and Treasurers, told attendees at a recent AICPA conference. Perhaps one of the group’s more controversial recommendations is to consider increasing the Circular A-133 single audit threshold, which is currently $500,000 or more in federal funding expenditures during an entity’s fiscal year, to $2 million spent annually.

Although the group did not make a specific recommendation on a new threshold amount, Poynter did cite Federal Audit Clearinghouse data showing that 50 percent of single audits were conducted for entities that spent less than $2 million in a year, yet comprised only 2 percent of the total federal funds. “Hypothetically, if you took the threshold up to $2 million a year, you’d wipe out half of the entities that had to have a single audit, and you’d only lose coverage of 2 percent of the federal dollars,” he added. “These are interesting statistics to think about.”

On one hand, raising the threshold would allow auditors to truly focus on the key grant recipients without wasting time and resources on smaller ones. Raising the threshold also would ease the burden of smaller grantees that just clear the threshold from the tedious single audit requirements under Circular A-133 — just ask some of the small communities that received federal emergency funding after Hurricane Katrina who then were required to have a single audit for the first time after they never had to have one before.

On the other hand, if the federal government truly wants to reduce improper payments and increase recoveries, it must look at every dollar spent, no matter the size of the grantee. Losing coverage of 2 percent of the federal dollars may not seem like much at first, but do we want to lose any more coverage than we already have as it is?

It will be very interesting to see what the OMB does with this recommendation, as well as all the recommendations from this workgroup. An article on the workgroup’s recommendations will be available in the October Single Audit Information Service.

We really would like to get your opinion on this issue. Should the A-133 single audit threshold be raised to $2 million? Should it be more? Should it stay the same? Should it go back to the $300,000 level of the early 2000s? Let us hear from you and we can pass this information on to the OMB for their consideration. 



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