Page:United States Statutes at Large Volume 110 Part 2.djvu/608

 110 STAT. 1400 PUBLIC LAW 104-156-JULY 5, 1996 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 organizational units which expended or otherwise administered Federal awards during such fiscal year provided that each such audit shall encompass 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 statements are presented fairly in all material respects in conformity with generally accepted accounting principles; "(2) determine whether the schedule of expenditures of Federal awards is presented fairly in all material respects in relation to the financial statements taken as a whole; "(3) with respect to internal controls pertaining to the compliance requirements for each major program— "(A) obtain an understanding of such internal 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 entity has complied with the provisions of laws, regulations, and contracts or grants pertaining to Federal awards that have a direct and material effect on each major program. "(f)(1) Each Federal agency which provides Federal awards to a recipient shall— "(A) provide such recipient the program names (and any identifying numbers) from which such awards are derived, and the Federal requirements which govern the use of such awards and the requirements of this chapter; and "(B) review the audit of a recipient as necessary to determine whether prompt and appropriate corrective action has been taken with respect to audit findings, as defined by the Director, pertaining to Federal awards provided to the recipient by the Federal agency. "(2) Each pass-through entity shall— "(A) provide such subrecipient the program names (and any identifying numbers) from which such assistance is derived, and the Federal requirements which govern the use of such awards and the requirements of this chapter; "(B) monitor the subrecipient's use of Federal awards through site visits, limited scope audits, or other means; "(C) review the audit of a subrecipient as necessary to determine whether prompt and appropriate corrective action has been taken with respect to audit findings, as defined by the Director, pertaining to Federal awards provided to the subrecipient by the pass-through entity; and "(D) require each of its subrecipients of Federal awards to permit, as a condition of receiving Federal awards, the independent auditor of the pass-through entity to have such

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