OMB Circular A-133: Common Audit Trouble Spots (Part 2 of 3)

This is the second of three posts from EisnerAmper LLP’s not-for-profit services team regarding some of the most common audit trouble spots we encounter during OMB Circular A-133 audits for organizations that receive federal grants.  (See Part One here.)  Being aware of these trouble spots will help your organization be better prepared for their audit.

  • How extensively have you documented your procedures around the use of government grant funds?  While most clients have good processes and procedures in place, often times they are not adequately documented.  Policies and procedures that should be documented include: 
    • Responsibilities for grants management:  Who is responsible for grant functions? Which costs are allowed and allowable pursuant to the grant?  Keep in mind that each funding source is likely to have its own set of rules in addition to the grant agreement guidelines.
    • Selection and monitoring of sub-recipients, vendors, and contractors:  As the recipient of the government funding, you are responsible even if you grant or contract out a portion of your award.  Documentation should include the process by which you will select these partners, and also the regular programmatic and financial monitoring that will take place.
  • In the case of a cost-reimbursement grant, all costs charged to the grant must be based on actual and supportable expenditures.  Many organizations know that they are prohibited from charging costs to a grant based on budgeted amounts.  In most cases, a receipt or executed contract can serve as sufficient support for an expenditure -- just be sure the receipt contains sufficient detail to prove that all costs are allowable.  In the case of a receipt for a meal, for example, the details of the items purchased needs to be included in order to appropriately determine if they are truly allowable.  In the case of payroll, some sort of contemporaneous documentation of time worked on the project must be maintained (this is usually accomplished with a timesheet, but other solutions may be available in cases where this might be administratively burdensome.)  Furthermore, the timesheet or other documentation must be reviewed and approved by a supervisor familiar with the work being done.

To see part 3 of this series, please click here.

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