Congress passed the Single Audit Act of 1984, as amended by the Single Audit Act Amendments of 1996, to improve state and local governments' financial management of federal financial assistance programs, to establish uniform requirements for audits of federal financial assistance, to promote efficient and effective use of audit resources and to ensure that federal departments rely on and use the audit work performed under the act. The act establishes requirements for audits of the entity's financial statements, including the Schedule of Expenditures of Federal Awards (SEFA), and for testing and reporting on internal controls and compliance with laws and regulations relevant to federal financial assistance. The act requires independent auditors to perform the audit in accordance with Generally Accepted Government Auditing Standards (GAGAS) as published by the Government Accountability Office (GAO) in its Yellow Book.
State and local governments must have a single audit according to the act if they receive federal financial assistance of $500,000 or more. A single audit consists of an audit of the basic financial statements and of the federal financial assistance (FFA). Office of Management and Budget (OMB) Circular A-133 specifies that FFA programs are to be classified as either Type A or Type B depending on the total FFA expended by the entity and provides a general explanation of how to determine the dollar threshold used to distinguish between the two types of programs. All Type A and all Type B programs whose total expenditures exceed a cutoff point, the calculation of which is also specified in Circular A-133, will be subject to a risk analysis that will determine the major federal programs to be audited.
For major federal programs, the auditor is required to plan and perform tests of controls to support a low assessed level of control risk regarding the operation of internal control structure policies and procedures considered relevant in preventing or detecting material noncompliance with the applicable FFA compliance requirements. Additionally, the auditor must determine whether the auditee has complied with laws, regulations, and the provisions of contracts or grant agreements that have a direct and material effect on each of its major federal programs. The compliance requirements applicable to FFA programs can be found in the OMB Circular A-133 Compliance Supplement published by the Office of Management and Budget.