What to Expect from the Nonprofit Audit Process

In either case, paid fringe benefits that are reasonable, necessary, allocable, and otherwise allowable may be included in the valuation. Final cost objective means a cost objective which has allocated to it both direct and indirect costs and, in the non-Federal entity’s accumulation system, is one of the final accumulation points, such as a particular award, internal project, or other direct activity of a non-Federal entity. See also the definitions of cost objective and intermediate cost objective in this section. The checklist below addresses the documentation to provide and steps needed when seeking a revised provisional rate and/or final rates.

• (2) Federal programs not labeled Type A under paragraph (b)(1) of this section must be labeled Type B programs.
• (b) Costs of bonding required pursuant to the terms and conditions of the Federal award are allowable.
• They are to be used in conjunction with the other provisions of this part in termination situations.
• The remaining sections of this Appendix (except for the requirement for certification) summarize the provisions of Subpart E of 45 CFR Part 95.
• Subpart E of this part establishes principles for determining the allowable costs incurred by non-Federal entities under Federal awards.

While a nonprofit organization (NFP) may center itself around humanitarian issues or rely on volunteers, the status is based on three specific factors defined by The Financial Accounting Standards Board (FASB). Knowing what to expect from the nonprofit audit process can transform it from daunting to doable. There are clear steps to the audit process, with responsibilities for both the auditing team and the organization. Learn what to expect from each step–and what’s expected of your organization–to keep the process moving forward efficiently. Another circumstance where a nonprofit organization may have to obtain an audit depends on the state in which that nonprofit is located.

Adjusting Indirect Cost Billings

The timing of your nonprofit audit heavily depends on the requirements of the organization to which you’re submitting the results. This should be the first place you look to see when it should be conducted. For the purpose of this article, we’ll primarily focus on external financial audits and how your organization can find an auditor, prepare your documentation, and determine your overall financial health. In addition to all of the inherent benefits of conducting a nonprofit financial audit, there are also charity watchdogs who provide information about charities to potential donors. These watchdogs may rank your organization higher if you’ve conducted an audit.

Work in excess of the standard work week is permissible provided that the worker is compensated at a rate of not less than one and a half times the basic rate of pay for all hours worked in excess of 40 hours in the work week. The requirements of 40 U.S.C. 3704 are applicable to construction work and provide that no laborer or mechanic must be required to work in surroundings or under working conditions which are unsanitary, hazardous or dangerous. These requirements do not apply to the purchases of supplies or materials or articles ordinarily available on the open market, or contracts for transportation or transmission of intelligence.

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(2) All costs included in this proposal are properly allocable to Federal awards on the basis of a beneficial or causal relationship between the expenses incurred and the Federal awards to which they are allocated in accordance with applicable requirements. (ii) dividing the total allowable indirect costs (net of applicable credits) by an equitable distribution base. The cognizant agency for indirect costs is responsible for negotiating and approving rates for an educational institution on behalf of all Federal agencies.

Recipient means an entity, usually but not limited to non-Federal entities that receives a Federal award directly from a Federal awarding agency. The term recipient does not include subrecipients or individuals that are beneficiaries of the award. See also the definition of Personally Identifiable Information (PII) in this section. Personally Identifiable Information (PII) means information that can be used to distinguish or trace an individual’s identity, either alone or when combined with other personal or identifying information that is linked or linkable to a specific individual. Some information that is considered to be PII is available in public sources such as telephone books, public websites, and university listings. This type of information is considered to be Public PII and includes, for example, first and last name, address, work telephone number, email address, home telephone number, and general educational credentials.

Preparing for an Audit with Aldrich

(1) Weaknesses in internal control over Federal programs would indicate higher risk. Consideration should be given to the control environment over Federal programs and such factors as the expectation of management’s adherence to Federal statutes, regulations, and the terms and conditions of Federal awards and the competence and experience of personnel who administer the Federal programs. (vi) Organize the Federal cognizant agency for audit’s law firm bookkeeping follow-up on cross-cutting audit findings that affect the Federal programs of more than one Federal awarding agency. (1) The audit must be completed and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (c) of this section must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period.

(h) The method used for determining cost sharing or matching for third-party-donated equipment, buildings and land for which title passes to the non-Federal entity may differ according to the purpose of the Federal award, if paragraph (h)(1) or (2) of this section applies. (g) Donated property from third parties may include such items as equipment, office supplies, laboratory supplies, or workshop and classroom supplies. Value assessed to donated property included in the cost sharing or matching share must not exceed the fair market value of the property at the time of the donation.

Acquisition costs for software includes those development costs capitalized in accordance with generally accepted accounting principles (GAAP). Ancillary charges, such as taxes, duty, protective in transit insurance, freight, and installation may be included in or excluded from the acquisition cost in accordance with the non-Federal entity’s regular accounting practices. Therefore, the organization should have internal controls in place regarding labor costs incurred that are evident, well defined, regularly maintained and updated as necessary, and verify effectiveness. Compile all remaining documentation identified in the indirect cost proposal checklist.