31 U.S.C. § 7501 — Definitions

Page 565 TITLE 31—MONEY AND FINANCE § 7501 1 So in original. Editorial Notes REFERENCES IN TEXT The Omnibus Budget Reconciliation Act of 1981, re- ferred to in text, is Pub. L. 97–35, Aug. 13, 1981, 95 Stat. 357. For complete classification of this Act to the Code, see Tables. CHAPTER 75—REQUIREMENTS FOR SINGLE AUDITS Sec. 7501. Definitions. 7502. Audit requirements; exemptions. 7503. Relation to other audit requirements. 7504. Federal agency responsibilities and relations with non-Federal entities. 7505. Regulations. 7506. Effective date. Editorial Notes AMENDMENTS 2016—Pub. L. 114–301, § 2(a)(2), Dec. 16, 2016, 130 Stat. 1514, added item 7506 and struck out former items 7506 ‘‘Monitoring responsibilities of the Comptroller Gen- eral’’ and 7507 ‘‘Effective date’’. 1996—Pub. L. 104–156, § 2, July 5, 1996, 110 Stat. 1396, amended chapter analysis generally, substituting in item 7504 ‘‘Federal agency responsibilities and rela- tions with non-Federal entities’’ for ‘‘Cognizant agency responsibilities’’ and in item 7507 ‘‘Effective date’’ for ‘‘Effective date; report’’. § 7501. Definitions (a) As used in this chapter, the term— (1) ‘‘Comptroller General’’ means the Comp- troller General of the United States; (2) ‘‘Director’’ means the Director of the Of- fice of Management and Budget; (3) ‘‘Federal agency’’ has the same meaning as the term ‘‘agency’’ in section 551(1) of title 5; (4) ‘‘Federal awards’’ means Federal finan- cial assistance and Federal cost-reimburse- ment contracts that non-Federal entities re- ceive directly from Federal awarding agencies or indirectly from pass-through entities; (5) ‘‘Federal financial assistance’’ means as- sistance that non-Federal entities receive or administer in the form of grants, loans, loan guarantees, property, cooperative agreements, interest subsidies, insurance, food commod- ities, direct appropriations, or other assist- ance, but does not include amounts received as reimbursement for services rendered to indi- viduals in accordance with guidance issued by the Director; (6) ‘‘Federal program’’ means all Federal awards to a non-Federal entity assigned a sin- gle number in the Catalog of Federal Domestic Assistance or encompassed in a group of num- bers or other category as defined by the Direc- tor; (7) ‘‘generally accepted government auditing standards’’ means the government auditing standards issued by the Comptroller General; (8) ‘‘independent auditor’’ means— (A) an external State or local government auditor who meets the independence stand- ards included in generally accepted govern- ment auditing standards; or (B) a public accountant who meets such independence standards; (9) ‘‘Indian tribe’’ means any Indian tribe, band, nation, or other organized group or com- munity, including any Alaskan Native village or regional or village corporation (as defined in, or established under, the Alaskan Native Claims Settlement Act) that is recognized by the United States as eligible for the special programs and services provided by the United States to Indians because of their status as In- dians; (10) ‘‘internal controls’’ means a process, ef- fected by an entity’s management and other personnel, designed to provide reasonable as- surance regarding the achievement of objec- tives in the following categories: (A) Effectiveness and efficiency of oper- ations.1 (B) Reliability of financial reporting.1 (C) Compliance with applicable laws and regulations; (11) ‘‘local government’’ means any unit of local government within a State, including a county, borough, municipality, city, town, township, parish, local public authority, spe- cial district, school district, intrastate dis- trict, council of governments, any other in- strumentality of local government and, in ac- cordance with guidelines issued by the Direc- tor, a group of local governments; (12) ‘‘major program’’ means a Federal pro- gram identified in accordance with risk-based criteria prescribed by the Director under this chapter, subject to the limitations described under subsection (b); (13) ‘‘non-Federal entity’’ means a State, local government, or nonprofit organization; (14) ‘‘nonprofit organization’’ means any cor- poration, trust, association, cooperative, or other organization that— (A) is operated primarily for scientific, educational, service, charitable, or similar purposes in the public interest; (B) is not organized primarily for profit; and (C) uses net proceeds to maintain, im- prove, or expand the operations of the orga- nization; (15) ‘‘pass-through entity’’ means a non-Fed- eral entity that provides Federal awards to a subrecipient to carry out a Federal program; (16) ‘‘program-specific audit’’ means an audit of one Federal program; (17) ‘‘recipient’’ means a non-Federal entity that receives awards directly from a Federal agency to carry out a Federal program; (18) ‘‘single audit’’ means an audit, as de- scribed under section 7502(d), of a non-Federal entity that includes the entity’s financial statements and Federal awards; (19) ‘‘State’’ means any State of the United States, the District of Columbia, the Common- wealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and the Trust Territory of the Pacific Islands, any in- strumentality thereof, any multi-State, re- gional, or interstate entity which has govern- mental functions, and any Indian tribe; and Page 566 TITLE 31—MONEY AND FINANCE § 7501 (20) ‘‘subrecipient’’ means a non-Federal en- tity that receives Federal awards through an- other non-Federal entity to carry out a Fed- eral program, but does not include an indi- vidual who receives financial assistance through such awards. (b) In prescribing risk-based program selection criteria for major programs, the Director shall not require more programs to be identified as major for a particular non-Federal entity, ex- cept as prescribed under subsection (c) or as pro- vided under subsection (d), than would be identi- fied if the major programs were defined as any program for which total expenditures of Federal awards by the non-Federal entity during the ap- plicable year exceed— (1) the larger of $30,000,000 or 0.15 percent of the non-Federal entity’s total Federal expend- itures, in the case of a non-Federal entity for which such total expenditures for all programs exceed $10,000,000,000; (2) the larger of $3,000,000, or 0.30 percent of the non-Federal entity’s total Federal expend- itures, in the case of a non-Federal entity for which such total expenditures for all programs exceed $100,000,000 but are less than or equal to $10,000,000,000; or (3) the larger of $300,000, or 3 percent of such total Federal expenditures for all programs, in the case of a non-Federal entity for which such total expenditures for all programs equal or exceed $300,000 but are less than or equal to $100,000,000. (c) When the total expenditures of a non-Fed- eral entity’s major programs are less than 50 percent of the non-Federal entity’s total expend- itures of all Federal awards (or such lower per- centage as specified by the Director), the audi- tor shall select and test additional programs as major programs as necessary to achieve audit coverage of at least 50 percent of Federal ex- penditures by the non-Federal entity (or such lower percentage as specified by the Director), in accordance with guidance issued by the Direc- tor. (d) Loan or loan guarantee programs, as speci- fied by the Director, shall not be subject to the application of subsection (b). (Added Pub. L. 98–502, § 2(a), Oct. 19, 1984, 98 Stat. 2327; amended Pub. L. 104–156, § 2, July 5, 1996, 110 Stat. 1396.) Editorial Notes REFERENCES IN TEXT The Alaskan Native Claims Settlement Act, referred to in subsec. (a)(9), probably means the Alaska Native Claims Settlement Act, Pub. L. 92–203, Dec. 18, 1971, 85 Stat. 688, which is classified generally to chapter 33 (§ 1601 et seq.) of Title 43, Public Lands. For complete classification of this Act to the Code, see Short Title note set out under section 1601 of Title 43 and Tables. AMENDMENTS 1996—Pub. L. 104–156 reenacted section catchline without change and amended text generally, sub- stituting present provisions for similar provisions de- fining terms used in this chapter. Statutory Notes and Related Subsidiaries SHORT TITLE OF 2024 AMENDMENT Pub. L. 118–207, § 1, Dec. 23, 2024, 138 Stat. 2701, pro- vided that: ‘‘This Act [amending section 7504 of this title] may be cited as the ‘Financial Management Risk Reduction Act’.’’ SHORT TITLE OF 2016 AMENDMENT Pub. L. 114–301, § 1, Dec. 16, 2016, 130 Stat. 1514, pro- vided that: ‘‘This Act [amending section 5226 of Title 12, Banks and Banking, section 280g–15 of Title 42, The Public Health and Welfare, and section 114 of Title 49, Transportation, renumbering section 7507 of this title as section 7506, repealing section 7506 of this title, amending provisions set out as notes under section 78m of Title 15, Commerce and Trade, and section 5189a of Title 42, and repealing provisions set out as a note under section 1395l of Title 42] may be cited as the ‘GAO Mandates Revision Act of 2016’.’’ SHORT TITLE OF 1996 AMENDMENT Pub. L. 104–156, § 1(a), July 5, 1996, 110 Stat. 1396, pro- vided that: ‘‘This Act [amending this chapter and en- acting provisions set out as notes below] may be cited as the ‘Single Audit Act Amendments of 1996’.’’ SHORT TITLE OF 1984 AMENDMENT Pub. L. 98–502, § 1(a), Oct. 19, 1984, 98 Stat. 2327, pro- vided that: ‘‘This Act [enacting this chapter and provi- sions set out as notes under this section] may be cited as the ‘Single Audit Act of 1984’.’’ TRANSITIONAL APPLICATION Pub. L. 104–156, § 3, July 5, 1996, 110 Stat. 1404, pro- vided that: ‘‘Subject to [former] section 7507 of title 31, United States Code (as amended by section 2 of this Act) [now 31 U.S.C. 7506] the provisions of chapter 75 of such title (before amendment by section 2 of this Act) shall continue to apply to any State or local govern- ment with respect to any of its fiscal years beginning before July 1, 1996.’’ CONGRESSIONAL STATEMENT OF PURPOSE Pub. L. 104–156, § 1(b), July 5, 1996, 110 Stat. 1396, pro- vided that: ‘‘The purposes of this Act [see Short Title of 1996 Amendment note above] are to— ‘‘(1) promote sound financial management, includ- ing effective internal controls, with respect to Fed- eral awards administered by non-Federal entities; ‘‘(2) establish uniform requirements for audits of Federal awards administered by non-Federal entities; ‘‘(3) promote the efficient and effective use of audit resources; ‘‘(4) reduce burdens on State and local govern- ments, Indian tribes, and nonprofit organizations; and ‘‘(5) ensure that Federal departments and agencies, to the maximum extent practicable, rely upon and use audit work done pursuant to chapter 75 of title 31, United States Code (as amended by this Act).’’ Pub. L. 98–502, § 1(b), Oct. 19, 1984, 98 Stat. 2327, pro- vided that: ‘‘It is the purpose of this Act [enacting this chapter and provisions set out as notes under this sec- tion]— ‘‘(1) to improve the financial management of State and local governments with respect to Federal finan- cial assistance programs; ‘‘(2) to establish uniform requirements for audits of Federal financial assistance provided to State and local governments; ‘‘(3) to promote the efficient and effective use of audit resources; and ‘‘(4) to ensure that Federal departments and agen- cies, to the maximum extent practicable, rely upon and use audit work done pursuant to chapter 75 of title 31, United States Code (as added by this Act).’’ Page 567 TITLE 31—MONEY AND FINANCE § 7502 TENNESSEE VALLEY AUTHORITY AUDITS UNAFFECTED BY SINGLE AUDIT REQUIREMENTS Pub. L. 98–502, § 2(b), Oct. 19, 1984, 98 Stat. 2334, pro- vided that: ‘‘The provisions of this Act [enacting this chapter and provisions set out as notes under this sec- tion] shall not diminish or otherwise affect the author- ity of the Tennessee Valley Authority to conduct its own audits of any matter involving funds disbursed by the Tennessee Valley Authority.’’ Executive Documents TERMINATION OF TRUST TERRITORY OF THE PACIFIC ISLANDS For termination of Trust Territory of the Pacific Is- lands, see note set out preceding section 1681 of Title 48, Territories and Insular Possessions. § 7502. Audit requirements; exemptions (a)(1)(A) Each non-Federal entity that expends a total amount of Federal awards equal to or in excess of $300,000 or such other amount specified by the Director under subsection (a)(3) in any fiscal year of such non-Federal entity shall have either a single audit or a program-specific audit made for such fiscal year in accordance with the requirements of this chapter. (B) Each such non-Federal entity that expends Federal awards under more than one Federal program shall undergo a single audit in accord- ance with the requirements of subsections (b) through (i) of this section and guidance issued by the Director under section 7505. (C) Each such non-Federal entity that expends awards under only one Federal program and is not subject to laws, regulations, or Federal award agreements that require a financial state- ment audit of the non-Federal entity, may elect to have a program-specific audit conducted in accordance with applicable provisions of this section and guidance issued by the Director under section 7505. (2)(A) Each non-Federal entity that expends a total amount of Federal awards of less than $300,000 or such other amount specified by the Director under subsection (a)(3) in any fiscal year of such entity, shall be exempt for such fis- cal year from compliance with— (i) the audit requirements of this chapter; and (ii) any applicable requirements concerning financial audits contained in Federal statutes and regulations governing programs under which such Federal awards are provided to that non-Federal entity. (B) The provisions of subparagraph (A)(ii) of this paragraph shall not exempt a non-Federal entity from compliance with any provision of a Federal statute or regulation that requires such non-Federal entity to maintain records con- cerning Federal awards provided to such non- Federal entity or that permits a Federal agency, pass-through entity, or the Comptroller General access to such records. (3) Every 2 years, the Director shall review the amount for requiring audits prescribed under paragraph (1)(A) and may adjust such dollar amount consistent with the purposes of this chapter, provided the Director does not make such adjustments below $300,000. (b)(1) Except as provided in paragraphs (2) and (3), audits conducted pursuant to this chapter shall be conducted annually. (2) A State or local government that is re- quired by constitution or statute, in effect on January 1, 1987, to undergo its audits less fre- quently than annually, is permitted to undergo its audits pursuant to this chapter biennially. Audits conducted biennially under the provi- sions of this paragraph shall cover both years within the biennial period. (3) Any nonprofit organization that had bien- nial audits for all biennial periods ending be- tween July 1, 1992, and January 1, 1995, is per- mitted to undergo its audits pursuant to this chapter biennially. Audits conducted biennially under the provisions of this paragraph shall cover both years within the biennial period. (c) Each audit conducted pursuant to sub- section (a) shall be conducted by an independent auditor in accordance with generally accepted government auditing standards, except that, for the purposes of this chapter, performance audits shall not be required except as authorized by the Director. (d) Each single audit conducted pursuant to subsection (a) for any fiscal year shall— (1) cover the operations of the entire non- Federal entity; or (2) at the option of such non-Federal entity such audit shall include a series of audits that cover departments, agencies, and other organi- zational units which expended or otherwise ad- ministered Federal awards during such fiscal year provided that each such audit shall en- compass the financial statements and schedule of expenditures of Federal awards for each such department, agency, and organizational unit, which shall be considered to be a non- Federal entity. (e) The auditor shall— (1) determine whether the financial state- ments are presented fairly in all material re- spects in conformity with generally accepted accounting principles; (2) determine whether the schedule of ex- penditures of Federal awards is presented fair- ly in all material respects in relation to the fi- nancial statements taken as a whole; (3) with respect to internal controls per- taining to the compliance requirements for each major program— (A) obtain an understanding of such inter- nal controls; (B) assess control risk; and (C) perform tests of controls unless the controls are deemed to be ineffective; and (4) determine whether the non-Federal enti- ty has complied with the provisions of laws, regulations, and contracts or grants per- taining to Federal awards that have a direct and material effect on each major program. (f)(1) Each Federal agency which provides Fed- eral awards to a recipient shall— (A) provide such recipient the program names (and any identifying numbers) from which such awards are derived, and the Fed- eral requirements which govern the use of such awards and the requirements of this chapter; and (B) review the audit of a recipient as nec- essary to determine whether prompt and ap- propriate corrective action has been taken