Spring 08 - Report on the National Single Audit Projects
government entities and nonprofit organizations. To ensure that these monies are being used for
their intended purpose, the Single Audit Act requires all nonfederal entities that receive and expend
$500,000 or more in federal awards in a year to obtain an annual “single audit.” Described in the
Office of Management and Budget (OMB) Circular A-133, this type of audit is typically referred to as
an A-133 audit.
The State Of The A-133 Audits
Overall, compliance with federal regulations appears to be high. But one study indicates that smaller
nonprofits, those that are new to government grants, and those with prior audit findings have a
significantly higher rate of adverse audit findings.
Another report, The National Single Audit Sampling Project, utilized Quality Control Reviews (QCRs)
to develop a statistically based measure of audit quality and recommend changes to improve the
quality of single audits. QCRs were conducted on a statistical sample randomly selected from a
universe of more than 38,000 audits. The population was split into two categories: Level I included
audits of entities that expended $50 million or more of federal awards, while Level II included audits
of entities that expended at least $500,000 but less than $50 million of federal awards.
What Was Found
Of the 208 audits reviewed, the statistical sample showed that a sizeable percentage contained
some type of deficiency. There was a noticeable difference in quality between the two levels, with a
higher percentage of unacceptable audits for Level II.
The most prevalent deficiencies included:
- Not documenting the understanding of internal controls over compliance requirements.
- Not documenting testing internal controls of at least some compliance requirements.
- Not documenting compliance testing of at least some compliance requirements.
Recommendations
The Audit Committee of the President’s Council on Integrity and Efficiency (PCIE) noted that the
number of audits in the acceptable group indicates that, with the application of due professional
care, proper single audits can be performed. That said, the Council did recommend that the federal
OMB work with related parties, including the American Institute of Certified Public Accountants
(AICPA), to reduce the deficiencies noted and improve the quality of single audits. The
recommended three-pronged approach includes:
- Revising and improving single audit standards, criteria and guidance.
- Establishing minimum requirements for training on performing single audits.
- Reviewing and enhancing processes to address unacceptable single audits.
Ensuring Compliance
Organizations should take all necessary measures to ensure that they are complying with single
audit criteria. In requesting proposals for audit services, the objectives and scope of the audit should
be made clear. Factors to be considered in evaluating each proposal for audit services include:
- The responsiveness to the request for proposal
- Relevant experience
- Availability of staff with professional qualifications and technical abilities
- The results of external quality control reviews
The Nonprofit Advisor is produced quarterly by Bober Markey Fedorovich's Nonprofit Services
Group. For questions, or to obtain additional information about the services we provide to tax-exempt
organizations, please contact Lori A. Sheets, CPA at 330.762.9785 or by email.
For more information:
Nonprofit Services
For the latest news and updates:
Subscribe
Unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
© 2008 Bober, Markey, Fedorovich & Company