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3 More Changes for Nonprofits in the A-133 Requirements

January 14, 2015

What it means to be considered low-risk and other single-audit changes.

In an earlier blog we discussed the Jan. 1, 2015, effective date for the Office of Management and Budget’s (OMB’s) sweeping changes to its rules for single audits, including requirements from Circular No. A-133, Audits of States, Local Governments, and Non-Profit Organizations, and three important changes nonprofits that receive federal funding need to be aware of. Here’s a look at three more changes nonprofits need to know about:

1. Low-Risk Auditee

Organizations will be considered low-risk (and eligible for reduced audit) if:

  • Single audits were performed annually,
  • The auditor’s opinion on whether the financial statements were prepared in compliance with the applicable basis of accounting and the auditor’s “in relation to” opinion on the schedule of expenditures of awards were unmodified,
  • There were no material weaknesses identified under the Generally Accepted Governmental Accounting Standards (GAGAS),
  • The auditor didn’t report a substantial doubt about the organization’s ability to continue as a going concern, and
  • In the two preceding audit periods, none of the Type A programs had internal control deficiencies identified as material weaknesses, a modified opinion on a major program or questioned costs exceeding 5% of the total federal awards expended.

2. Percentage of Coverage Rule

The minimum percentage of total federal awards expended that must be audited as major programs has dropped from 25% to 20% for low-risk award recipients and from 50% to 40% for all others.

3. Reportable Questioned Costs

The threshold for known and likely questioned costs that auditors must report will increase from $10,000 to $25,000. In evaluating the effect of questioned costs on the opinion on the nonprofit’s compliance, the auditor will consider the best estimate of total costs questioned (likely questioned costs) — not just the questioned costs specifically identified by the auditor (known questioned costs).

We can help you determine how OMB’s changes to the single audit rules will affect your organization.

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