Does your organization receive federal grants? If so, did you know that you are required to establish and maintain internal controls to ensure that you are following the provisions of the grant? Most of the time organizations are concerned with having proper internal controls over their routine accounting related functions, but having internal controls over compliance requirements of federal grants can be just as important.

     What are you required to do? According to OMB Circular A-133 (which governs the administration of federal awards), organizations are required to:
“Maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs.”
       To ensure that you have the proper controls in place, it is a good idea to perform an assessment of each of the compliance requirements that affect your federal grants. Here are a few questions you can ask yourself and others involved with the administration of the grant:
     “How do we know that case managers who are carrying out the program are fully informed of the provisions of the grant?”
     “What process do we have that would prevent an unallowable cost from being charged to the grant?
     “How do we know that participants in the program are eligible to receive services? Does anyone verify eligibility after the initial assessment?”
     “How do we make certain that we have paid for allowable costs before we request reimbursement from the grantor?”
     “How do we communicate changes involving the grant to those personnel who need to know?”
     “Do we routinely check the “Excluded Parties Listing System” to ensure that we are not doing business with any vendors that have been suspended or debarred?”
     “What process do we have in place to make sure that all reports were filed accurately and timely?”

     After doing this assessment, you may find that your internal controls need to be strengthened. If you need assistance with this, please give us a call.

If your organization has ever been involved with a single audit, you know that they are a “different animal”. Very different than a financial statement audit. Why? Single Audits involve testing for “compliance with rules”.  RCO recently sponsored a workshop for the Executive Exchange where we highlighted common compliance deficiencies that we have observed while conducting single audits. In an effort to help not-for-profit organization become more compliant, we thought we would share these findings with our “blog community.” 

There are potentially 14 areas of compliance requirements.  The first step in compliance is knowing which of these requirements pertain to your grant(s). Which requirement relate to your grant, see this post. The compliance requirements are listed below and include some of the “common” deficiencies we have encountered.

• Allowable activities – activities that are being performed under the “guise” of a grant are not allowed by that grant.
• Allowable costs – expenses charged to the grant are not approved; documentation, such as invoices, can’t be located; expenses that are being allocated, such as salaries, are not done properly and/or proper documentation is not maintained.
• Cash management – funds that are drawn down are not spent timely; reimbursements are requested from the grantor before the funds are actually spent by the not-for-profit organization.
• Davis-Bacon Act – not knowing that this requirement applies to your grant (usually involves federal awards used for construction purposes).
• Eligibility – not maintaining proper documentation to show that program recipient was eligible for services; no review to ensure that staff are following guidelines.
• Equipment and real property management – not performing an inventory of items obtained with federal awards; not clearly marking/tagging property; not maintaing accurate records of items acquired and/or disposed of that were purchased with federal awards.
• Matching, level of effort, earmarking – not monitoring during the year to determine if you are meeting the match or level of effort; using income items for a match that do not qualify; documentation to determine if these items have been complied with have not been maintained or is incomplete.
• Period of availability – requesting reimbursement of an expense that was incurred before or after the grant period.
• Procurement – not checking the excluded parties list (at www.epls.gov) to determine if vendors with which you do business have been suspended or debarred; not following your organization’s procurement policies; not obtaining bids when required.
• Program income – not properly recorded or misclassified; used as part of your match when it is not allowed.
• Real property acquisition and relocation assistance – not doing your research when purchasing property that may require relocation of the current owners.
• Reporting – not submitting your reports to the grantor timely or not knowing when the reports are to be submitted; documentation for number of participants served or expenses requested for reimbursement on the reports does not agree with the documentation supporting these numbers.
• Subrecipient monitoring – not realizing that you have subrecipients; not properly monitoring those subrecipients

For more information about these compliance requirements, you can review the OMB Circular A-133, Compliance Supplement, OMB Circular A-122 (cost principles) and OMB Circular A-110 (administrative requirements) on-line.

Would you like your audit to go smoother?  Would you like to know the difference between a financial statement audit and a compliance audit?  Would you like to shorten the time the auditors are at your office?  If you answered “yes” to any of these questions, then you should attend the “Executive Exchange” hosted by the Funding Information Center on Wednesday, March 4th (11:30 – 1:00). 

Compliance=Accountability: Preparing for an Audit will be presented by Linda Low, Audit Partner and Donna Mayes, Audit Manager, both with Rylander, Clay and Opitz, LLP.  During this informative workshop, you will learn what can make your life easier, how to make the auditors’ happy, how to reduce/eliminate internal control deficiencies, and how to easily remedy common compliance issues associated with your single audit. 

For more information and registration, contact the Funding Information Center .

Changes to the data collection form have been released by the Federal Audit Clearinghouse to be effective for audits with fiscal periods ending in 2008 through 2010. Click to find the new form and filing instructions.

What changes were made?
Primary changes include those in terminology, due to provisions of SAS 112. The term reportable condition has been changed to significant deficiency in Part II-items 3 and 4, and Part III – items 4, 5 and 10a.

These changes are consistent with the Federal Register Notice dated June 26, 2007, which addressed how to handle new AICPA, OMB and Yellow Book guidance on the applicability of SAS 112 to single audits.

Also, the form will be required to be submitted electronically. To assist in the preparation of the new filing requirements, the Federal Audit Clearinghouse provides a Form SF-SAC Worksheet & Single Audit Component Checklist that can be downloaded and used to assist in preparing the form.

As part of our firm’s client service, we prepare this form electronically. Our clients receive notification via e-mail to accept the submission. Auditees will only have to submit one copy of the reporting package along with the data collection form and the Federal Audit Clearinghouse will distribute the required copies to the appropriate federal agencies.

If you prepare your entity’s form and need assistance, give us a call.