1. Module 11 Federal Funds and Single Audits Convery 20131

2. Understand the issues that arise when federal funds are received and expended Describe a “Single Audit” and when it is required Identify the reports required in a Single Audit Convery 20132

3. A nonprofit organization that expends (not receives) more than $500,000 in federal financial assistance is required to have a “Single Audit” according to the Single Audit Act of Congress. – 1996 Single Audit Act Amendments – OMB Circular A-133 – OMB Compliance Supplement Sometimes state and local governments “pass- through” federal grants to nonprofit organizations, so they may be subject to Single Audit Act and not realize it. Convery 20133

4.  Identify the CFDA # for each federal award. Convery 20134

5.  OMB Circular A-122 Cost Principles for Non-Profit Organizations (??) and ◦ details allowable and unallowable costs  OMB Circular A-110 Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations (??) ◦ details administrative requirements, such as bids and nondiscrimination  On the web at http://www.omb.gov/circularshttp://www.omb.gov/circulars Convery 20135

6. Consideration of Fraud in a Financial Statement Audit (2/97) Red flags related to poor internal controls often found in small nonprofit organizations: – Lack of management oversight – Lack of job applicant screening procedures – Inadequate recordkeeping – Lack of segregation of duties – Lack of appropriate system of authorization and approval or transactions – Poor physical safeguards over cash, investments, inventory, or fixed assets – Lack of timely and appropriate documentation for transactions – Lack of mandatory vacations for employees performing key control functions. Convery 20136

7.  Some boards are adopting a bylaw or resolution that defines an audit committee’s purpose and responsibilities, just as businesses do.  Members should be directors who are not employees of the organization and who have no significant financial relationship with management.  Responsibilities include reviewing the organization’s system of internal controls; appointing internal auditors and reviewing their work; recommending an independent auditing firm to the board; reviewing the audit engagement; and reviewing the annual financial statements, opinion rendered, and any management recommendations from the auditors. Convery 20137