Waivers for OMB Circular A-133 Low Risk Auditees
Interim Procedures for Entities Seeking Waiver of Single Audit Circular Requirements to Receive Low-Risk Auditee Status
The Single Audit Act, as amended, and OMB Circular A-133 (Circular) prescribes audit requirements for non-Federal entities expending $500,000 or more a year in federal awards. Auditors are generally required to audit Federal programs that, in the aggregate, include at least half of all Federal awards expended. If an entity meets the requirements sets forth in the Circular for low-risk auditees [described below], then auditors need only audit Federal programs that, in the aggregate, included at least 25 percent of all Federal awards expended.
In certain cases, entities that fail to meet the low-risk auditee requirements may still qualify if they can demonstrate that certain qualifications or reported deficiencies do not affect their management of Federal awards. Such entities may request low-risk audit status by seeking a waiver from their cognizant or oversight federal agency. The office responsible for granting waivers within the Department of Education is the Office of the Chief Financial Officer (OCFO).
Qualifying as low-risk auditee?
According to the Circular, a low-risk auditee must meet four conditions for each of the preceding two years before the year for which a waiver is requested. In the case of auditees on a biennial audit cycle, these conditions must be met for the two preceding audit periods.
- Single audits of the entity have been performed on an annual basis in accordance with the requirements of the Circular. An entity that has biennial audits does not qualify as low-risk auditee unless advance approval is given by the cognizant or oversight agency.
- The entity has received an "unqualified" opinion from auditors on its financial statements and the schedule of expenditures of Federal awards. However, the cognizant or oversight agency for audits may judge that an opinion qualification does not affect the management of Federal awards and provide a waiver.
- The entity has no internal control deficiencies that were identified as material weaknesses under the requirements of Generally Accepted Government Auditing Standards. The cognizant or oversight agency for audit may judge that any identified material weaknesses do not affect the management of Federal awards and provide a waiver.
- Federal programs classified as Type A programs had no audit findings which were: (a) internal control deficiencies which were identified as material weaknesses; (b) noncompliance with the provisions of laws, regulations, contracts, or grants agreements that have a material effect on the Type A program; or (c) known or likely questioned costs exceeding five percent of the total Federal awards expended for a Type A program during the year.
How to apply for a waiver of the low-risk auditee status requirements?
If you meet all the conditions listed in the Circular for low-risk auditee status you need not submit any further information. A waiver may be granted only for conditions stated in items 2 and 3 above. When a waiver is needed, follow these procedures:
1. Determine whether ED is your cognizant or oversight agency. Waiver requests go to that federal agency serving as the cognizant or oversight agency. Generally, cognizance/or oversight is determined by identifying the federal agency providing the largest amount of funding from direct grants. If no direct money goes to an entity, cognizance or oversight goes to the agency that sends the most flow-through funds [i.e., money that a federal agency sends to state-level agencies, for subsequent distribution to local agencies, such as school districts].
If ED has cognizance or oversight, address the letter to:
Lead Management Analyst, Post Audit Group
U.S. Department of Education
550 12th Street, SW
Washington, DC 20202
2. Describe the financial statement qualification(s) or internal control weakness(es) identified by auditors in the past two single audits. Explain also why the financial statement qualification(s) or internal control weakness(es) does not affect your organization's ability to manage Federal awards.
3. Include written concurrence by each organization providing you with $100,000 or more of flow-through funds. The concurrence letter should indicate that the flow-through agency does not object to the waiver, notwithstanding the financial statement qualification(s) or internal control weakness(es) auditors have identified.
4. Submit a copy of the last two single audits of your organization, or as a minimum: (1) the schedules of expenditures of federal awards; and (2) the financial statement qualifications and/or internal control weakness(es) that auditors have identified. A streamlined procedure is available for those requesting waivers on behalf of two or more entities.
For more information, please call Lihong Guo at 202-245-8039.
How long it takes for a waiver request to be reviewed?
On average, ED requires 30 days to review a waiver request. Entities seeking low-risk auditee status should allow enough time for this review period. More time may be needed to review requests involving complex issues and/or requiring extensive coordination with other federal agencies. OCFO coordinates review of the requests with ED staff, who may use information available from various sources, including site visits, program or OIG reports.
What happens after a waiver is issued?
An entity that has received a waiver qualifying it as a low-risk auditee need not submit annual requests for the same waiver if no changes have occurred. The low-risk auditee status is maintained as long as ED is the cognizant or oversight agency for the entity and no changes occur in the frequency of audits and in the qualification(s) or internal control weakness(es) reported by the auditors.
In the event that an entity receives federal funds from flow-through agencies not identified in the original waiver request, letters of concurrence will be submitted to ED for each new flow-through agency.
For additional information, please contact Lihong Guo at 202-245-8039 or write to:
Post Audit Group
550 12th Street, SW
Washington, DC 20202