Increasing the Capacity of Individuals, Families and Communities

Managing Public Grants

Property Management | Noncompliance and Termination

Audits¹³

All faith-based and community organizations that receive Federal funds are subject to basic audit requirements. These audits are intended only to examine the federally funded parts of an organization’s operations and are not designed to identify unrelated problems. The audits are necessary to make sure that Federal dollars have been spent properly on legitimate costs. Therefore, it is extremely important for grant recipients to keep accurate records of all transactions conducted with Federal funds.¹⁴

Most organizations are not audited by the government itself, although the Federal government has the right to audit any program that receives public money at any time. For example, charities that spend less than $300,000 a year in Federal funds are generally asked only to perform a "self-audit." Larger grants (those over $300,000 a year) require an audit by a private, independent outside legal or accounting firm. More information on audits may be found on the Office of Management and Budget’s website (www.whitehouse.gov/omb/circulars).¹⁵

Non-Federal organizations that expend $300,000 or more in a year in Federal awards are required to have a single or program-specific audit conducted for that year. Non-Federal entities that expend less than $300,000 a year in Federal awards are exempt from Federal audit requirements for that year, but they must make records available for review or audit by appropriate officials of the Federal agency and General Accounting Office (GAO). The scope of a single audit or program-specific audit includes a purposeful review of the following information:

• Financial statements. To determine that you conformed to generally accepted accounting principles, and that the schedule of expenditures of Federal awards is presented fairly in relation to your financial statements.
• Internal control. To assess effectiveness in detecting noncompliance with the agreement. Also, to assess compliance with generally accepted accounting principles and control risk for major programs.
• Compliance. To determine whether you have complied with laws, regulations and the provisions of contracts or grant agreements that may have a direct and material effect on each of your major programs.
• Audit follow-up. The auditor will follow up on prior audit findings from your organization and (as a current year audit finding) report indications of prior misrepresentation.
• Data Collection Form. The auditor will complete and sign specified sections of the data collection form.

OMB Circular A-133 governs audit procedures. The following information provides an overview of audit requirements and procedures. Consult the OMB Circular A-133 for specific information.

Your Organization’s Audit Responsibilities
Your organization can prepare and maintain program records for audits by the Federal government by following this checklist:

Preparing for an Audit and Maintaining Program Records   Identify 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 the provisions of contracts or grant agreements. Comply with laws, regulations and the provisions of contracts or grant agreements related to each of your Federal programs. Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with applicable provisions. Ensure that the required 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 in accordance with applicable provisions.

Records Maintenance
Financial records, supporting documents, statistical records, and all other records pertinent to an award must be retained for a period of three years from the date of submission of the final expenditure report. Some exceptions may apply given litigation, property records and agency transference. See OMB Circular A-110 for specific details.

If authorized, copies of original records may be substituted for the original records. The Federal awarding agency may request transfer of certain records to its custody from recipients when it determines that the records possess long-term retention value.

As long as records are maintained, the Federal awarding agency, or any of its duly authorized representatives, have the right of timely and unrestricted access to any books, documents, papers or other records of recipients that are pertinent to the awards in order to make audits, examinations, excerpts, transcripts and copies of such documents. This right also includes timely and reasonable access to personnel for interviews and discussion related to such documents.

Property Management | Noncompliance and Termination