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

This is EisnerAmper LLP’s not-for-profit team’s final installment of reviewing some of the most common audit trouble spots we counter during OMB Circular A-133 audits for organizations that receive federal grants (see Part 1  and Part 2).  Being aware of these trouble spots will help your organization better prepare for their OMB Circular A-133 audit.

  • Most recipients of government grants know that if costs are running over or under in any particular category, a budget modification may be obtained from the funder granting the not-for-profit organization permission to reallocate their funding.  There is one lesser known area of budget modification that can get some clients into trouble.  Switching out personnel or job categories from what was originally approved by the funder in the grant proposal is not allowed.  If your grant proposal contained a budget for 2 junior researchers, 1 senior researcher and 1 principal investigator, you can only charge salaries to the grant for those 4 specific jobs.  Should the services of a second senior be required, the not-for-profit cannot begin to charge his salary to the grant in place of one of the pre-approved junior researchers without an approved budget modification from the funder.
  •  When property and equipment are purchased with government funding, there are often requirements about the records that need to be maintained.  Not-for-profits usually are expected to keep a detailed inventory (this can be integrated into your fixed asset module or accomplished outside of the general ledger entirely) of all assets purchased with government funds including things like their location, a serial number, date placed in service and date of disposal, if applicable.  Many governmental funders require that an inventory of these items be taken regularly and documented.
  • It is the client’s responsibility – not the auditor’s – to prepare the Schedule of Expenditures of Federal Awards (SEFA).  As with all of the other components of your not-for-profit’s financial statements, the auditor is engaged simply to offer its opinion on the statements, not to create them.  If your organization is unable to prepare its SEFA, auditing standards suggest that a material weakness or significant deficiency in internal controls should be reported to the audit committee or board of directors.


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