SUMMARY: On June 30, 1997, OMB published revised Circular A-133 to 

implement the Single Audit Act Amendments of 1996. The Act sets forth 

requirements for obtaining consistency and uniformity among Federal 

agencies for the audit of States, local governments, and non-profit 

organizations expending Federal awards. This rule adopts the revised 

requirements.



DATES: Effective date: December 18, 1997.

    Comment Due Date: January 20, 1998.



ADDRESSES: Interested persons are invited to submit comments regarding 

this interim rule to the Office of the General Counsel, Rules Docket 

Clerk, Room 10276, Department of Housing and Urban Development, 451 

Seventh Street, S.W., Washington, D.C. 20410-0500. Comments should 

refer to the above docket number and title. A copy of each 

communication submitted will be available for public inspection and 

copying during regular business hours (weekdays 7:30 a.m. to 5:30 p.m. 

Eastern time) at the above address. Facsimile (FAX) comments are not 

acceptable.



FOR FURTHER INFORMATION CONTACT: William E. Dobrzykowski, Deputy Chief 

Financial Officer for Finance, (202) 708-0650. (This is not a toll-free 

number.) Hearing-impaired or speech-impaired individuals may access the 

voice telephone number listed above by calling the Federal Information 

Relay Service during working hours at 1-800-877-8339.



SUPPLEMENTARY INFORMATION: On June 30, 1997, the Office of Management 

and Budget (OMB) published revised Circular No. A-133, re-titled 

``Audits of States, Local Governments, and Non-Profit Organizations,'' 

which established uniform audit requirements for non-Federal entities 

that administer Federal awards and implemented the Single Audit Act 

Amendments of 1996 (Pub.L. 104-156, enacted July 5, 1996). OMB Circular 

No. A-128, ``Audits of States and Local Governments,'' which was issued 

in 1985, was rescinded as a result of the consolidation of audit 

requirements under Circular A-133.

    One of the more significant revisions is that the threshold for 

when an entity is required to have an audit is raised from $25,000 to 

$300,000. Other significant changes are: a report submission due date 

which is shortened from 13 to 9 months and a report submission process 

that includes a data collection form and streamlined filing 

requirements; a new risk-based approach for major program 

determination; and additional guidance for program-specific audits, 

audit findings, and audit findings follow-up.

    Through this interim rule the Department of Housing and Urban 

Development (HUD) adopts these requirements. In addition, HUD is adding 

a provision to set forth a clarification regarding the uniform audit 

requirements for non-profit organizations participating in HUD programs 

whose regulations are set forth in 24 CFR in the part 200 and 800 

series, such as parts 207, 213, 220, 221, 231, 232, 234, 236, 241, 242, 

244, 266, 880, 881, 882, 883, 884, 886, and 891. The clarification 

provides that non-profit organizations subject to regulations in the 

part 200 and part 800 series of 24 CFR shall comply with the audit 

requirements of revised OMB Circular A-133. Audits of non-profit 

organizations under these programs were previously subject to the 

requirements of the Consolidated Audit Guide for Audits of HUD Programs 

(HUD Handbook 2000.04). This audit guide no longer applies to audits of 

non-profit organizations. For HUD programs, a non-profit organization 

is the mortgagor or owner and not a related or affiliated organization 

or entity. The terms ``mortgagor'' or ``owner'' are defined in the 

regulations in the part 200 and part 800 series, such as Secs. 207.251, 

891.205 and 891.305.

    HUD is also removing and reserving 24 CFR parts 44 and 45 since 

these parts are no longer applicable because of the revised circular. A 

number of conforming technical revisions are needed throughout HUD's 

regulations in title 24 of the CFR as a result of HUD's adoption of the 

uniform audit requirements. Those revisions will be set forth in a 

subsequent separate rulemaking.



Findings and Certifications



Environmental Impact



    This amendment is excluded from the environmental review 

requirements of the National Environmental Policy Act (42 U.S.C. 4321-

4347) and the other related Federal environmental laws and authorities, 

as set forth in 24 CFR part 50. In keeping with the exclusion provided 

for in 24 CFR 50.19(c)(1), this amendment does not ``direct, provide 

for assistance or loan and mortgage insurance for, or otherwise govern 

or regulate property acquisition, disposition, lease, rehabilitation, 

alteration, demolition, or new construction, or set out or provide for 

standards for construction or construction materials, manufactured 

housing, or occupancy.''



Regulatory Flexibility Act



    The Secretary, in accordance with the Regulatory Flexibility Act (5 

U.S.C. 605(b)), has reviewed this interim rule before publication and 

by approving it certifies that this interim rule will not have a 

significant economic impact on a substantial number of small entities. 

This interim rule merely adopts government-wide requirements related to 

auditing. The interim rule does not affect the amount of funds provided 

in the covered programs, but rather increases the threshold for non-

Federal entities subject to audit, thereby reducing burden on some 

small entities.



Executive Order 12612, Federalism



    The General Counsel, as the Designated Official under section 6(a) 

of Executive Order 12612, Federalism, has determined that this interim 

rule does not have ``federalism implications'' because it does not have 

substantial direct effects on the States (including their political 

subdivisions), or on the distribution of power and responsibilities 

among the various levels of government.



Unfunded Mandates Reform Act



    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-

4; approved March 22, 1995) (UMRA) establishes requirements for Federal 

agencies to assess the effects of their regulatory actions on State, 

local, and tribal governments, and on the private sector. This interim 

rule would not impose any Federal mandates on any State, local, or 

tribal governments, or on the private sector, within the meaning of the 

UMRA.



List of Subjects



24 CFR Part 5



    Administrative practice and procedure, Aged, Claims, Drug abuse, 

Drug traffic control, Grant programs--housing and community 

development, Grant programs-Indians, Grant programs--low and moderate 

income housing, Indians, Individuals with





disabilities, Intergovernmental relations, Loan programs--housing and 

community development, Low and moderate income housing, Mortgage 

insurance, Penalties, Pets, Public housing, Rent subsidies, Reporting 

and recordkeeping requirements, Social security, Unemployment 

compensation, Wages.



24 CFR Part 44



    Accounting, Grant programs, Indians, Intergovernmental relations, 

Loan programs, Reporting and recordkeeping requirements.



24 CFR Part 45



    Accounting, Colleges and universities, Grant programs, Loan 

programs, Non-profit organizations, Reporting and recordkeeping 

requirements.



24 CFR Part 84



    Accounting, Audit requirements, Colleges and universities, Grant 

programs--housing and community development, Loan programs--housing and 

community development, Non-profit organizations, Reporting and 

recordkeeping requirements.



24 CFR Part 85



    Accounting, Audit requirements, Grant programs, Indians, 

Intergovernmental relations, Reporting and recordkeeping requirements.



    Accordingly, parts 5, 44, 45, 84, and 85 of title 24 of the Code of 

Federal Regulations are amended as follows:



PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS



    1. The authority citation for part 5 continues to read as follows:



    Authority: 42 U.S.C. 3535(d), unless otherwise noted.



    2. Subpart A is amended to add a new Sec. 5.107 to read as follows:





Sec. 5.107  Audit requirements for non-profit organizations



    Non-profit organizations subject to regulations in the part 200 and 

part 800 series of title 24 of the CFR shall comply with the audit 

requirements of revised OMB Circular A-133, ``Audits of States, Local 

Governments, and Non-Profit Organizations'' (see 24 CFR 84.26). For HUD 

programs, a non-profit organization is the mortgagor or owner (as these 

terms are defined in the regulations in the part 200 and part 800 

series) and not a related or affiliated organization or entity.



PARTS 44 AND 45--[REMOVED AND RESERVED]



    3. Parts 44 and 45 are removed and reserved.



PART 84--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 

AGREEMENTS WITH INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, AND 

OTHER NON-PROFIT ORGANIZATIONS



    4. The authority citation for part 84 continues to read as follows:



    Authority: 42 U.S.C. 3535(d).



    5. Section 84.26 is amended by revising paragraphs (a), (b), and 

(c) to read as follows:





Sec. 84.26  Non-Federal audits.



    (a) Recipients and subrecipients that are institutions of higher 

education or other non-profit organization (including hospitals) shall 

be subject to the audit requirements contained in the Single Audit Act 

Amendments of 1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-

133, ``Audits of States, Local Governments, and Non-Profit 

Organizations.''

    (1) Non-profit organizations subject to regulations in the part 200 

and part 800 series of this title which receive awards subject to part 

84 shall comply with the audit requirements of revised OMB Circular A-

133, ``Audits of States, Local Governments, and Non-Profit 

Organizations.'' For HUD programs, a non-profit organization is the 

mortgagor or owner (as these terms are defined in the regulations in 

the part 200 and part 800 series) and not a related or affiliated 

organization or entity.

    (2) Reserved.

    (b) State and local governments shall be subject to the audit 

requirements contained in the Single Audit Act Amendments of 1996 (31 

U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of States, 

Local Governments, and Non-Profit Organizations.''

    (c) For-profit hospitals not covered by the audit provisions of 

revised OMB Circular A-133 shall be subject to the audit requirements 

of the Federal awarding agencies.

* * * * *

    6. Section 84.82 is amended by revising paragraphs (e)(1), (2), and 

(3) to read as follows:





Sec. 84.82  Provisions applicable only to lump sum grants.



* * * * *

    (e) Non-Federal audits. (1) Recipients and subrecipients that are 

institutions of higher education or other non-profit organizations 

(including hospitals) shall be subject to the audit requirements 

contained in the Single Audit Act Amendments of 1996 (31 U.S.C. 7501-

7507) and revised OMB Circular A-133, ``Audits of States, Local 

Governments, and Non-Profit Organizations.''

    (i) Non-profit organizations subject to regulations in the part 200 

and part 800 series of this title which receive awards subject to part 

84 shall comply with the audit requirements of revised OMB Circular A-

133, ``Audits of States, Local Governments, and Non-Profit 

Organizations.'' For HUD programs, a non-profit organization is the 

mortgagor or owner (as these terms are defined in the regulations in 

the part 200 and part 800 series) and not a related or affiliated 

organization or entity.

    (ii) [Reserved].

    (2) State and local governments shall be subject to the audit 

requirements contained in the Single Audit Act Amendments of 1996 (31 

U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of States, 

Local Governments, and Non-Profit Organizations.''

    (3) For-profit hospitals not covered by the audit provisions of 

revised OMB Circular A-133 shall be subject to the audit requirements 

of the Federal awarding agencies.

* * * * *



PART 85--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 

COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS



    7. The authority citation for part 85 continues to read as follows:

    Authority: 42 U.S.C. 3535(d).



    8. Section 85.26 is amended by revising paragraphs (a), (b) 

introductory text, and (b)(1), to read as follows:





Sec. 85.26  Non-Federal audits.



    (a) Basic rule. Grantees and subgrantees are responsible for 

obtaining audits in accordance with the Single Audit Act Amendments of 

1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of 

States, Local Governments, and Non-Profit Organizations.'' The audits 

shall be made by an independent auditor in accordance with generally 

accepted government auditing standards covering financial audits.

    (b) Subgrantees. State or local governments, as those terms are 

defined for purposes of the Single Audit Act Amendments of 1996, that 

provide Federal awards to a subgrantee which expends $300,000 or more 

(or other amount as specified by OMB) in Federal awards in a fiscal 

year, shall:

    (1) Determine whether State or local subgrantees have met the audit





requirements of the Act and whether subgrantees covered by OMB Circular 

A-110, ``Uniform Administrative Requirements for Grants and Agreements 

with Institutions of Higher Education, Hospitals, and Other Non-Profit 

Organizations,'' have met the audit requirements of the Act. Commercial 

contractors (private for-profit and private and governmental 

organizations) providing goods and services to State and local 

governments are not required to have a single audit performed. State 

and local governments should use their own procedures to ensure that 

the contractor has complied with laws and regulations affecting the 

expenditure of Federal funds;

* * * * *

    Dated: October 22, 1997.

Andrew Cuomo,

Secretary.

[FR Doc. 97-30181 Filed 11-17-97; 8:45 am]

BILLING CODE 4210-01-P