The $2 Million Question, Part 2

February 1, 2012 | By Jerry Ashworth | Post a Comment

In today’s digital age, we’re growing ever more accustomed to instant feedback. Send an e-mail to a colleague and within minutes, you receive a reply. Post something on Facebook and a friend soon shares their feelings on the same issue.

That’s why I was somewhat taken aback a week or so ago when we received a comment to a blog post I ran in September. Not that I minded the lag between the post and the comment; it’s just that I had to go back and refresh myself with the topic. Therefore, today I present the sequel to that post.

My September post discussed a workgroup of federal, state and local officials evaluating ways to reduce improper payments. Kinney Poynter, executive director of the National Association of State Auditors, Comptrollers and Treasurers, said that the group submitted its recommendations to the Office of Management and Budget last summer, and that one of its more controversial recommendations was 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.

According to the post, Poynter cited 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.

In mid-January, a commenter to the post raised a key question for clarification. He asked if the 2 percent of federal funds was referring to grant funds or 2 percent of the federal budget. “Keep in mind that grant funds are the only federal funds that are audited, the remainder of the federal budget is not audited at all,” he said. You can read the rest of his comments here.

I sent this comment to Poynter to get his response. He said OMB faces “a balancing act trying to balance adequate audit coverage and use of audit resources.” To clarify, he said that if the audit threshold was raised to $2 million, 96 percent of all federal grant funds would be covered under single audits; however, approximately 28,000 entities would no longer have a single audit. These entities cover an additional 4 percent of grant funds. He suggested that a financial audit conducted under the Government Auditing Standards would provide an appropriate level of accountability for these entities.

Regardless of whether or not the threshold is changed, grantor agencies and primary recipients should not rely solely on single audits. There are other options available (e.g., site visits) to ensure the program is operating effectively. Perhaps we should focus more on those to make sure government funds are spent properly.

We appreciate your feelings on this issue. Let us know how you feel about raising the single audit threshold and if more clarification is needed.

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