Audit Requirements for Nonprofits
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Texas Education Agency 2012
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Two Sources of Audit Requirements
or Financial Reporting
• Texas Non-Profit Corporation Act, Vernon’s
Texas Civil Statutes, Article 1396-2.23A.
Financial Records and Annual Reports
• Office of Management and Budget (OMB)
Circular A-133, Audits of States, Local
Governments, and Non-Profit Organizations
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Texas Education Agency 2012
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Texas Non-Profit Corporation Act
Article 1396-2.23A. Financial Records and Annual Reports
A. Corporations shall maintain current true and accurate financial records
with full and correct entries made with respect to all financial
transactions of the corporation, including all income and expenditures,
in accordance with generally accepted accounting practices.
B. Based on these records, the board of directors shall annually prepare or
approve a report of the financial activity of the corporation for the
preceding year.
C. All records, books, and annual reports of the financial activity of the
corporation shall be kept at the registered office or principal office of the
corporation in this state for at least three years after the closing of each
fiscal year.
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Texas Education Agency 2012
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OMB Circular A-133
• Requires a Single Audit if the grantee expends more
than $500,000 total in each fiscal year in federal
grant funds (all federal grants added together)
• 34 CFR 74.26 requires nonprofit organizations to
comply with the requirements in the Single Audit Act
and OMB Circular A-133
• Single Audits are conducted by an independent
auditor hired by the nonprofit organization
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Texas Education Agency 2012
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Single Audit Requirements
• A single audit encompasses a grantee’s financial statements
and schedule of expenditures of federal awards for the entire
organization.
• A program-specific audit focuses on one particular program
and may be selected by the auditee if they expend federal
awards under only one federal program and the federal
program’s laws, regulations, or grant agreements do not
require a financial statement audit of the auditee (primarily
for grantees that receive only one federal grant even if they
expend more than $500,000 annually)
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Single Audit Requirements Cont.
• In cases of continued inability or unwillingness to
have an audit conducted in accordance with A-133,
TEA can:
– (a) withhold a percentage of federal awards until
the audit is completed satisfactorily;
– (b) withhold or disallow overhead costs;
– (c) suspend federal awards until the audit is
conducted; or
– (d) terminate the federal award.
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Cost of Audits
• The cost of audits conducted under OMB
Circular A-133 are allowable charges to a
federal grant
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Texas Education Agency 2012
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Your Responsibilities
Under OMB Circular A-133, Auditees (i.e., YOUR ORGANIZATION) shall:
•
Identify, in your accounts, all Federal awards received and expended and the
federal programs under which they were received.
•
Maintain internal control over federal programs that provides reasonable
assurance that you are managing federal awards in compliance with laws,
regulations, and provisions.
•
Comply with laws, regulations, and provisions of grant agreements.
•
Prepare appropriate financial statements, including the schedule of expenditures
of federal awards.
•
Ensure audits are properly performed and submitted when due.
•
Follow up and take corrective action on audit findings, including preparation of a
summary schedule of prior audit findings and a corrective action plan.
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Texas Education Agency 2012
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Audit Report Submission
• Audit must be completed and the data collection
form and reporting package submitted with 30 days
after receipt of the independent auditor’s report, or
9 months after the end of the audit period,
whichever is earlier.
• Data Collection Form (completed by the auditor) states the audit was completed in accordance with A133 and provides information about your
organization, your federal programs, and the results
of the audit
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Audit Report Submission Cont.
Reporting Package:
• Financial statements and schedule of
expenditures of federal awards
• Summary schedule of prior audit findings
• Auditor’s report
• Corrective action plan
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Texas Education Agency 2012
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Audit Report Submission
• You must submit a copy of the Data Collection
Form and the reporting package to the Federal
Clearinghouse designated by OMB
• http://harvester.census.gov/sac/
• Click on “Search the Single Audit Database”
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Texas Education Agency 2012
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TEA’s Responsibilities
TEA’s Division of Financial Audits:
• Ensure subrecipients expending $500,000 or more in
federal awards during the past fiscal year have met
the audit requirements
• Issue a management decision on audit findings
within 6 months after receipt of the audit report and
ensure that the grantee takes appropriate and timely
corrective action
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Texas Education Agency 2012
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Management Decision
• Clearly states whether or not the audit finding is
sustained, the reasons for the decision, and the
expected action to repay disallowed costs, make
financial adjustments, or take other action.
• If the grantee has not completed corrective action, a
timetable for follow-up should be given.
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