While a not-for-profit entity receiving federal funds is subject to what’s known as a Single Audit, a lesser known fact is that for-profit entities awarded federal grants also have an audit to prepare for, helping to ensure those funds are being used appropriately. As such, for-profit entities with federal expenditures of $750,000 in their fiscal year will need to be ready for the grant (or compliance) audit that will soon follow. If your entity falls in this category, below are six key actions to help you prepare:
1. Review the Grant Agreement
Carefully review the terms and conditions of the award and the specific requirements related to compliance. This agreement will typically outline reporting deadlines, allowable costs, documentation requirements and any special conditions.
2. Seek Out Your Compliance Obligations
In reviewing the grant agreement, look up the Assistance Listing number in the OMB Compliance Supplement and familiarize yourself with the compliance requirements applicable to your award. Based on your research, review your financial records and verify grant funds were used for authorized purposes and expenses were incurred in accordance with allowable cost principles.
3. Document Processes and Procedures
Document your internal controls, policies, and procedures related to grant management and expenditure accounting. This documentation should detail how grant funds are managed, how expenses are tracked and allocated, and the steps taken to ensure compliance.
4. Organize Documentation
Gather all relevant documentation related to the grant. This will include, but is not limited to, your financial records, expenditure reports, contracts and more. Ensure your documentation is well organized and readily accessible for review.
5. Train Your Staff
Provide training to staff involved in the grant process. Ensure everyone understands their responsibilities and the grant agreement requirements.
6. Communicate with the Grantor
Open communication with the grantor can be beneficial. Clarify any vague terms and conditions, report any issues encountered and address any concerns in a timely fashion.
In addition to the above steps, working with external auditors or consultants is another way to help you prepare. Their assessment can help identify areas for improvement to remain in compliance with the terms of the grant and help effectively prepare you for the audit.
Contact Sean Kilcher or a member of your service team to discuss this topic further.
