How to Better Prepare for an A-133 AuditPosted on February 16th, 2018
Nonprofit organizations are already used to a yearly audit for tax reporting purposes. However, if they receive more than $75,000 in federal funding, then the IRS will require an A-133 audit as well.
A-133 audits are different enough from standard attestation engagements that the auditor must be knowledgeable in it to conduct. Alston & Company, CPAs, is passionate about helping our clients prepare for these engagements through our extensive experience in them. There are a few key steps we recommend you take in advance of an A-133 audit.
Organizing Major and Minor Grants
A not-for-profit organization must be able to separate the major and minor grants they received from the federal government and compile their associated records. They must also demonstrate compliance with all requirements set by their major grants.
If you receive any amount of federal funding, especially if you know the amount will necessitate an A-133 audit, then you need to keep all grants organized. You should separate your major and minor grants and compile their associated records. Your ability to demonstrate compliance with each grant’s unique requirements is improved by making this financial information as easily accessible as possible.
Unlike non-specified donations and revenue, the funds associated with each grant must be tracked separately from all other sources. The not-for-profit entity needs a clear, concise budget for each grant to fully monitor its use.
When you separate your organization’s grants and compile their associated records, you must include the documentation demonstrating that you followed that budget. In addition to preparing you for an A-133 audit, this process can reveal areas of improvement for budget compliance so you can correct these as soon as possible.
Internal Controls over Financial Reporting
The organization must clearly demonstrate how they operate each program financially. Since this requires accurate financial records and reports, they must be able to prove that the numbers on all documents are accurate. In other words, A-133 audits will examine a not-for-profit’s internal controls.
This may not be possible if your organization’s internal controls have significant oversights, which will be reflected in the auditor’s formally documented opinion. You should review your controls on a regular basis to find issues ahead of time. That way, you can correct them before they complicate an audit or, more importantly, your ability to serve your community.
Contact Us for A-133 Audit Support
Alston & Company, CPAs, offers nonprofit auditing services in Freehold, New Brunswick, Trenton, Newark, and anywhere else our clients do business in the tristate area. Whether you need an independent CPA to conduct an A-133 or need help planning for one, our firm can help you. For more information about our not-for-profit accounting services, call us today and schedule your consultation.