Nonprofits that undergo regular single audits subject to the Office of Management and Budget’s Uniform Guidance become quite familiar with the audit process. These organizations dutifully fulfill their audit obligations, always hopeful that auditors will have only positive findings and full compliance to report. But despite best efforts, some audits will inevitably include findings for which a corrective action plan is required.
When auditors uncover issues of concern, they typically fall into one of four common areas: allowable costs; procurement, suspension and debarment; reporting; and sub-recipient monitoring. Previous HBP blog articles have examined the first two problem areas; in the third of our four-part series on common audit findings we will explore compliance issues around reporting requirements.
Full compliance with reporting requirements can be a confusing challenge for nonprofit leaders, as the rules can vary across specific grants, programs and/or clusters of programs. To avoid audit findings related to reporting, nonprofit leaders should attend carefully to the various reports that may be required as well as their due dates. For each grant or program, an organization may need to complete up to three different types of reports:
- Financial reports
- Performance reports
- Special reports
The annual audit itself is one of the prime financial reporting requirements for nonprofits. In addition, many organizations must complete a Federal Financial Report (FFR) for one or more grants and/or programs. The FFR includes information about cash receipts and disbursements, Federal expenditures and other detailed financial information describing the financial activities surrounding individual grants and the programs they support. Each grant agreement will include information that determines whether the organization is required to complete an FFR.
Two other common financial reports are required only in certain circumstances:
- Grant recipients may need to complete Form SF-270, Request for Advance or Reimbursement.
- Organizations that utilize federal funds for construction projects may also be required to complete an Outlay Report and Request for Reimbursement for Construction Programs.
Recipients of federal grants must perform ongoing monitoring and reporting on the performance of programs, activities and functions that involve grant funds. In each report, organizations should compare measurements of actual accomplishment to the program or grant qualification’s stated objectives. If the organization did not meet established goals, the report must explain why.
Cost computations for accomplishment as well as performance trend data and analysis should also be included in performance reports. Additional reporting information may include a listing of significant developments related to programs or activities, explanations of any delays or difficulties in achieving established goals and a detailed explanation regarding any cost overruns.
Special reporting includes a variety of less-common reports that may be required for particular grants or programs. As with standard reporting requirements, a grantee’s obligation to meet special reporting requirements, if there is one, will be included in grant documentations.
Many federal grant programs share a common set of reporting requirements, which appear in the latest version of the compliance supplement published by the Office of Management and Budget. However, some grants and granting agencies deviate from these standards or include additional reporting requirements. To fulfill all reporting obligations, it is critically important for nonprofit leaders to read and thoroughly understand the entire grant agreement for all grants received.
Failure to meet reporting deadlines is a frequent stumbling block that can create problems for nonprofits, including penalties and losing access to key funding sources. One of the most common pitfalls is an assumption that a due date of 30 days (or 90 days) following a particular date or event is equivalent to one (or three) months after the date or event in question. While the substitution may work as expected over some time periods, it will not always result in timely filings. When calculating due dates, nonprofits should establish the actual date based on calendar days rather than estimations that assume months represent uniform 30-day periods.
In addition to reading and closely following reporting requirements as laid out in each grant agreement, nonprofits can protect themselves from charges of untimely reporting by taking screenshots of confirmations for online submissions and retaining these images as evidence that the reporting was completed as required.
Nonprofit reporting is neither simple nor easy, but performing this ongoing task correctly is an absolute necessity if the organization is to maintain grant funding and remain in compliance with federal law. The nonprofit specialists at HBP are your go-to resource for answers and support with nonprofit reporting, compliance and all other aspects of your organization’s continued growth and success.
Written by Allison Griesbach, Senior Accountant