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Module 11 Federal Funds and Single Audits

Module 11 Federal Funds and Single Audits. Learning Objectives. 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. Single Audit.

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Module 11 Federal Funds and Single Audits

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  1. Module 11 Federal Funds and Single Audits Convery 2013

  2. Learning Objectives • 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 2013

  3. Single Audit • 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 2013

  4. Federal Financial Assistance • Identify the CFDA # for each federal award. Convery 2013

  5. OMB Circulars • 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/circulars Convery 2013

  6. AICPA Statement of Auditing Standard No. 82 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 2013

  7. Audit Committees • 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 2013

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