Compliance with regulations will always be present as a concern for nonprofits, especially at the federal level. Audits are a fact of life.
At the AICPA Not-for-Profit Industry Conference, Mandy Nelson of KPMG and Steve Glover of Brigham Young University offered several observations from the federal study on single audit quality related to sampling, citing information from Office of Management and Budget (OMB) Circular A-133 and applicable auditing standards and AICPA audit guides.
The study’s authors believe that comparable numbers of transactions for federal programs should be tested in comparable single audits. Nelson and Glover shared information on individual important considerations in compliance testing.
These considerations include:
- Items that might be large, risky or unusual, and can include a spike in activity at the beginning or end of a grant period; transactions processed at odd times in a cycle; transactions related to sub-recipients that are new to a grantee, especially newly formed entities; and, transactions related to a prior finding or anything specified in the Compliance Supplement.
- Identification of individual items is not required by A-133 but is often a smart approach.
- Auditor expertise and experience can often identify risky items than can chance or random selection.
- Anything that can increase efficiency and effectiveness. For example, 10 items cover 80 percent of grant expenditures.