An Overview of OMB Circular A-133

OMB Circular A-133, titled "Audits of States, Local Governments, and Non-Profit Organizations," was a critical federal regulation in the United States designed to provide oversight for the expenditure of federal awards. Established by the Office of Management and Budget (OMB), its primary purpose was to ensure that organizations receiving federal financial assistance managed those funds in accordance with applicable laws, regulations, and cost principles.

The Purpose and Scope of the Circular

The fundamental goal of Circular A-133 was to promote sound financial management and accountability. By requiring regular independent audits, the federal government aimed to reduce the burden on non-federal entities while ensuring that federal programs were being administered correctly. This framework created a "single audit" process, which effectively consolidated multiple audit requirements into one comprehensive review.

        Note on Evolution: It is important to note that OMB Circular A-133 was superseded by the "Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards," commonly known as the Uniform Guidance (2 CFR 200). While A-133 is no longer the active governing document, its principles remain the foundation of current federal audit standards.    

The Single Audit Concept

Before the introduction of A-133, organizations receiving funds from multiple federal agencies were often subject to numerous, fragmented audit requirements. The Circular revolutionized this by introducing the "Single Audit." Under this model, an organization that expended a certain threshold of federal funds (originally $500,000, later adjusted) in a single fiscal year was required to undergo a comprehensive audit covering both financial statements and compliance with federal requirements.

Key Requirements for Entities

Entities subject to these audits were required to fulfill several specific obligations:

Preparation of Financial Statements: The organization had to prepare financial statements that reflected its financial position and results of operations.
Schedule of Expenditures of Federal Awards (SEFA): Entities were required to maintain a detailed schedule listing all federal awards received and expended.
Internal Control Assessment: Auditors were tasked with assessing the internal controls over federal programs to ensure that funds were used for authorized purposes.
Compliance Testing: This involved testing transactions to ensure they adhered to the specific laws and regulations associated with each federal grant program.

Auditor Responsibilities

The auditors role under A-133 was multifaceted. They were not only responsible for an opinion on the fairness of the financial statements but also for providing a report on compliance and internal control over major programs. A "major program" was defined based on a risk-based approach, ensuring that auditors focused their attention on the areas where federal funds were at the highest risk of misuse.

The Impact on Transparency and Accountability

The legacy of A-133 lies in its ability to standardize accountability across diverse organizations, ranging from small non-profits to large state governments. By creating a standardized reporting packagewhich included the audit report, the financial statements, and the Data Collection Form (SF-SAC)the federal government created a centralized repository of information. This allowed federal agencies to monitor how their investments were performing and identify systemic issues in grant administration.

Conclusion

OMB Circular A-133 was a landmark policy that defined the relationship between the federal government and its grantees for decades. It prioritized transparency, encouraged stronger internal systems, and protected the integrity of public funds. While the regulatory landscape has since transitioned to the Uniform Guidance, the principles established by A-133 continue to serve as the cornerstone of federal grant oversight in the modern era.

Reference Files For OMB Circular A-133

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