Do you work for a nonfederal entity? Does your organization receive federal grants and awards? Does your organization expend $750,000 or more in these awards in one fiscal year? If you answered yes to all of these questions, then your organization is subject to a single audit in accordance with the Office of Management and Budget (OMB) Circular A-133.
This audit reviews financial statements, internal controls and compliance. It must be performed by an independent auditor in accordance with GAGAS (Generally Accepted Governmental Auditing Standards).
As with any audit, you will want to ensure that your company is sufficiently prepared for the A-133 audit. Follow these steps to guarantee your organization’s readiness.
Internal controls are policies and procedures put in place to ensure the continued reliability of the accounting system. They are designed to prevent fraud and identify any errors in the system before they become larger problems. Having internal controls in place is crucial during an A-133 audit. The following controls are most important:
- Separation of duties. To ensure supervision and division of power, each staff person should be assigned a specific role and responsibility.
- Access controls. These ensure that a limited number of authorized staff has access to grant documents and folders.
- Periodic reconciliation. This ensures the accuracy of financial information. Tip: reconcile your account records to the federal financial reports that have been filed to make sure they match.
- Approval authority. To ensure grant compliance and accurate cost accounting, it is imperative for grant managers to authorize any federal expenditures.
Policies and Procedures
Ensure that your company writes, implements and enforces policies and procedures for factors including, but not limited to, the following:
- Conference reporting
- Suspension and debarment
- Sole procurement
- Subreceipt monitoring
Knowledge of Allowable Expenses
Since not all expenses qualify for federal grant use (like alcoholic beverages or lobbying costs), it is crucial to know which do. If you are unsure if certain company expenses are covered, you can refer to cost principle OMB Circular A-122, which lists all allowable expenses for federal awards.
Once you know an expense is allowable, be sure to still get the approval of your company’s grant manager, along with appropriate documentation and support.
Tip: for additional efficiency, try keeping records of all your company’s expenditures in electronic format. This will save you a lot of time during the audit!
Review and Timely Completion of Client Assistance Letter Items
The client assistance letter is designated to help the fiscal and program staff gather the appropriate information for the audit. This information includes, but is not limited to, government contracts and summaries, narratives about internal controls over key transactions and major program compliance. Give yourself time to review all requested items carefully, and address any questions or concerns with auditors immediately. The goal should be to have all requested information ready for the audit before the start of the fieldwork. Many auditors allow submission of documents and work papers electronically to facilitate the overall process.
Availability During the Audit
All grant and accounting staff should be present during the audit to address questions and requests in a timely manner. Once the audit begins, you should be prepared and responsive, listening carefully and answering only the questions being asked of you. Remember to be proactive and professional at all times.
Attend Training Courses
In preparation for the audit, accounting and grant personnel are encouraged to attend training courses on federal grant accounting and management. These courses typically include sessions on:
- Cash management guidelines
- Regulations and requirements for draw-downs
- Indirect costs
- Internal controls
- Subreceipt monitoring
- Risk management
- Allowable costs and activities
In addition, as part of most grant acceptance requirements, federal agencies now mandate training for federal site visits or desk reviews, so why not kill two birds with one stone?
What Else Do I Need to Know?
Should you find something that can lead to an audit finding, it is important that you do not attempt to hide it. Instead, be truthful and notify the auditors immediately.
This being said, do not merely accept audit findings. Make sure you thoroughly review them and discuss them with the audit team to learn about their implications.
Written by Kristin Siebeneicher; Senior Accountant.