No. Per the regulations, a commercial organization is subject to audit requirements for a non-federal audit if, during its fiscal year, it expended $300,000* or more under HHS awards and at least one award is an HHS grant or subgrant. Therefore, the organization must have one grant or subgrant in order to be required to obtain a non-federal audit, but other HHS awards are included in the threshold calculations and the scope of the audit.  (See threshold calculation examples.) [* Note: The threshold increases to $500,000 for audits of fiscal years ending after December 31, 2003.]

The determination of when an award is expended should be based on when the activity related to the award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with laws, regulations, and the provisions of contracts or grant agreements, such as: expenditure/expense transactions associated with grants, cost-reimbursement contracts, cooperative agreements and the disbursement of funds passed through to subrecipients.

No, fixed price contracts are not included in the threshold calculations.  HHS financial assistance (typically grants and cooperative agreements) and HHS cost-reimbursement contracts that the for-profit entity receives directly from HHS or indirectly from a pass-through entity are to be included in the threshold calculations. (See threshold calculation examples.)

HHS grants/cooperative agreement or cost-reimbursement contract dollars received directly, as well as, indirectly (i.e., through a pass-through entity) must be included in the threshold calculation and the scope of any required audit. (See threshold calculation examples.)

The Department of Health and Human Services (HHS) has specified requirements for non-Federal audits of for-profit (commercial) organizations in HHS’ Title 45, Code of Federal Regulations (CFR), Part 74.26, “Non-Federal Audits.” http://www.access.gpo.gov/nara/cfr/waisidx_99/45cfr74_99.html This regulation provides the for-profit awardee the option of having an organization wide audit that meets the requirements of A-133 or a financial related audit of the HHS awards in accordance with Government Auditing Standards (the Yellow Book).

Technical representatives of the National External Audit Review Center (NEARC) have  equated the “Yellow Book" option available to for-profit organizations to a “program specific audit” as defined under OMB Circular A-133 §___.235. 

The Circular defines the term auditor as a public accountant or a Federal, State or local government audit organization, which meets the general standards specified in the generally accepted government auditing standards (GAGAS). This definition of the term auditor would not include internal auditors of the organization. (See the “Yellow Book” at http://www.gao.gov/govaud/ybk01.htm for GAGAS.)

The auditee pays for the audit. Audit costs are typically recovered as part of indirect costs.

No, for-profit entities are not required to complete a data collection form (SF-SAC). The data collection forms are used to enter audit data in the Federal Audit Clearinghouse (FAC) database. For-profit entities are not required to submit audit report packages to FAC, and for-profit audit data is not entered in the database.

45 CFR 74.26(d) essentially incorporates the deadlines of OMB Circular A-133; i.e., Audits shall be completed and submitted within the earlier of 30 days after receipt of the auditor’s report or nine months after the end of the organization’s fiscal year.  Note: The Federal Acquisition Regulation requires submission of final indirect cost (IDC) rate proposals within six months of the end of the awardee’s fiscal year. It would therefore appear beneficial for the awardee to have the required audits completed within six months to allow for their use in the preparation of the IDC proposals.

Audit reports of for-profit organizations are to be submitted to:

National External Audit Review Center
HHS Office of Audit Services
323 West 8th Street
Lucas Place, Room 514
Kansas City, MO 64105 Phone: 800-732-0679 or 816-374-6714

The Circular states that a program-specific audit may not be elected for R&D unless all of the Federal awards expended were received from the same Federal agency, or the same Federal agency and the same pass-through entity, AND that Federal agency, or pass-through entity in the case of a subrecipient, approves in advance a program-specific audit. HHS’ Title 45, Code of Federal Regulations (CFR), Part 74.26(d)(1)(i) basically provides the advanced approval required. It provides the “Yellow Book” option “in those cases where the recipient receives awards under only one HHS program; or, if awards are received under multiple HHS programs.“

The organization’s fiscal year.

Audits are required annually for each fiscal year that the threshold is met.

Commercial organizations with HHS expenditures less than the audit requirement threshold are exempt from requirements for a non-Federal audit for that year, but records must be available for review by appropriate HHS officials.