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Copyright © Texas Education Agency 2012 1 Audit Requirements for Nonprofits
Copyright © Texas Education Agency 2012 2 Two Sources of Audit Requirements or Financial Reporting Texas Non-Profit Corporation Act, Vernon’s Texas Civil Statutes, Article 1396-2.23A. Financial Records and Annual Reports Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations
Copyright © Texas Education Agency 2012 3 Texas Non-Profit Corporation Act Article 1396-2.23A. Financial Records and Annual Reports A.Corporations shall maintain current true and accurate financial records with full and correct entries made with respect to all financial transactions of the corporation, including all income and expenditures, in accordance with generally accepted accounting practices. B.Based on these records, the board of directors shall annually prepare or approve a report of the financial activity of the corporation for the preceding year. C.All records, books, and annual reports of the financial activity of the corporation shall be kept at the registered office or principal office of the corporation in this state for at least three years after the closing of each fiscal year.
Copyright © Texas Education Agency 2012 4 OMB Circular A-133 Requires a Single Audit if the grantee expends more than $500,000 total in each fiscal year in federal grant funds (all federal grants added together) 34 CFR 74.26 requires nonprofit organizations to comply with the requirements in the Single Audit Act and OMB Circular A-133 Single Audits are conducted by an independent auditor hired by the nonprofit organization
Copyright © Texas Education Agency 2012 5 Single Audit Requirements A single audit encompasses a grantee’s financial statements and schedule of expenditures of federal awards for the entire organization. A program-specific audit focuses on one particular program and may be selected by the auditee if they expend federal awards under only one federal program and the federal program’s laws, regulations, or grant agreements do not require a financial statement audit of the auditee (primarily for grantees that receive only one federal grant even if they expend more than $500,000 annually)
Copyright © Texas Education Agency 2012 6 Single Audit Requirements Cont. In cases of continued inability or unwillingness to have an audit conducted in accordance with A-133, TEA can: – (a) withhold a percentage of federal awards until the audit is completed satisfactorily; – (b) withhold or disallow overhead costs; – (c) suspend federal awards until the audit is conducted; or – (d) terminate the federal award.
Copyright © Texas Education Agency 2012 7 Cost of Audits The cost of audits conducted under OMB Circular A-133 are allowable charges to a federal grant
Copyright © Texas Education Agency 2012 8 Your Responsibilities Under OMB Circular A-133, Auditees (i.e., YOUR ORGANIZATION) shall: Identify, in your accounts, all Federal awards received and expended and the federal programs under which they were received. Maintain internal control over federal programs that provides reasonable assurance that you are managing federal awards in compliance with laws, regulations, and provisions. Comply with laws, regulations, and provisions of grant agreements. Prepare appropriate financial statements, including the schedule of expenditures of federal awards. Ensure audits are properly performed and submitted when due. Follow up and take corrective action on audit findings, including preparation of a summary schedule of prior audit findings and a corrective action plan.
Copyright © Texas Education Agency 2012 9 Audit Report Submission Audit must be completed and the data collection form and reporting package submitted with 30 days after receipt of the independent auditor’s report, or 9 months after the end of the audit period, whichever is earlier. Data Collection Form (completed by the auditor) - states the audit was completed in accordance with A- 133 and provides information about your organization, your federal programs, and the results of the audit
Copyright © Texas Education Agency 2012 10 Audit Report Submission Cont. Reporting Package: Financial statements and schedule of expenditures of federal awards Summary schedule of prior audit findings Auditor’s report Corrective action plan
Copyright © Texas Education Agency 2012 11 Audit Report Submission You must submit a copy of the Data Collection Form and the reporting package to the Federal Clearinghouse designated by OMB http://harvester.census.gov/sac/ Click on “Search the Single Audit Database”
Copyright © Texas Education Agency 2012 12 TEA’s Responsibilities TEA’s Division of Financial Audits: Ensure subrecipients expending $500,000 or more in federal awards during the past fiscal year have met the audit requirements Issue a management decision on audit findings within 6 months after receipt of the audit report and ensure that the grantee takes appropriate and timely corrective action
Copyright © Texas Education Agency 2012 13 Management Decision Clearly states whether or not the audit finding is sustained, the reasons for the decision, and the expected action to repay disallowed costs, make financial adjustments, or take other action. If the grantee has not completed corrective action, a timetable for follow-up should be given.
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