Beck & Company presents presentation on proposed A-133 audit changes for nonprofit organizations.

1. Understanding the A133
Proposed Rule Changes
for Nonprofit
Organizations

2. Kathy Beck, CPA
• Over 25 years experience assisting nonprofit organizations with their accounting
and tax issues
• Experience includes audits, outsourced
CFO services, grant administration, Form
990 preparation

3. Agenda
• History and Background
• Highlights of proposed changes
– Audit requirements
– Cost principles
– Administrative requirements
• Steps you can take now to prepare for the
changes

4. Why is OMB considering changes?
• More than 15 years since the last significant view of rules
• Increase effectiveness and efficiency of federal programs
• Eliminate unnecessary and duplicative requirements
• Focus on areas at most risk of improper payments
• OMB’s goal is to concentrate resources on higher dollar
and risk

5. History of Changes
• November 2009 - President called for reducing improper
payments and eliminate waste
• February 2011 - Presidential Memoradum promoting
adminstrative flexibility
• February 2012 - publication of potential changes and
announcing a period for public comments
• February 2013 – publication of Reform of Federal
Policies Relating to Grants and Cooperative
Agreements; Cost Principles and Administrative
Requirements (Including Single Audit Act) with comment
period until May 2, 2013

6. Implementation of Proposed Changes
The Office of Management and Budget has
not indicated the timeframe for the issuance
of a final regulation or a potential effective
date of the regulation once issued.

7. Single Audit Requirements
• Increase audit threshold from $500K of federal
expenditures to $750K
• Entities with less than $750K of expenditures would
make records available for review or audit
• The Type A program threshold is increased from
$300,000 to $500,000.
• The percentage coverage of federal expenditures
required for testing is decreased from 50 percent to 40
percent for regular auditees, and from 25 percent to
20 percent for low-risk auditees.

8. Changes to major program
determination process
• Updated criteria for high-risk Type A programs,
including failure to have an unqualified opinion
on the program, a material weakness in internal
controls, or questioned costs exceeding 5
percent of the program’s expenditures.
• Reduction in the number of high-risk Type B
programs that must be tested from one-half to at
least one-fourth.

9. Effect of Proposed Changes
• Currently more than $600 billion of Federal
Grants and Awards to non-profit
organizations
• Approximately 5,000 Single Audits of
smaller Organizations would be eliminated
under the proposed regulations

10. Reduction of compliance requirements
subject to testing
Compliance requirements subject to testing would be streamlined, with
some requirements removed. They would be limited to the following
areas:
– Activities allowed or not allowed and allowable costs/cost
principles
– Cash management
– Eligibility
– Period of availability of federal funds
– Matching
– Reporting
– Subrecipient monitoring
– Special tests and provisions

11. Compliance requirements removed from
testing would be:
–
–
–
–
–
–
Davis-Bacon Act
Equipment and real property management
Level of effort and earmarking
Procurement, suspension, and debarment
Program income
Real property acquisition and relocation assistance
The OMB will consider requests from agencies to add back certain
compliance provisions where these requirements are essential to
the program as special tests and provisions.

12. Streamlining of Guidance
• Consolidation of the current eight Circulars
into one document
• Consolidation of cost principles into a
single document with limited variations by
type of entity

13. Indirect Cost Rates
– Extending negotiated indirect cost rates for up
to four years
– Allowing an indirect cost minimum flat rate of
10 percent for entities that don’t yet have the
capacity for a full negotiation for no more than
four years
– Requiring pass-through entities to either honor
the indirect cost rate, negotiate a rate in
accordance with federal guidelines, or provide
the minimum flat rate

14. Other Proposed Reforms
• Exploring alternative methods of time and effort
reporting for salary and wages through trial
programs, with the aim of reducing the
administrative burden on organizations in
determining the portion of salary and wages to
be charged to federal awards
• Clarifying thresholds for allowable residual
inventory. Up to $5,000 in supplies can be
carried over to another federal award under
certain circumstances.

15. Administrative Requirements
• One uniform set of administrative requirements for all
recipients by consolidating the current eight sources into
one
• Require pre-award consideration of the merit and financial
risk included in each grant recipient’s proposal
• Agencies must provide 90-day notice of funding
opportunities
• Provides a standard format for announcements of funding
opportunities

16. What do you need to do to prepare?
• Identify new compliance requirements - 2012 compliance supplement
http://www.whitehouse.gov/omb/circulars/a133_compliance_supplement_2012
• Document new internal controls over new compliance requirements
• Prepare SEFA and complete SEFA disclosure checklist
• Consider self-review/internal audit based on suggested audit
procedures in Compliance Supplement
• Be prepared for more federal agency follow-up on findings reported
in Single Audits
• Be aware of common findings
• Make sure corrective action has been implemented on prior year
findings
• Keep up to date on the proposed rule changes and when they will go
into effect

17. QUESTIONS

18. Next Steps
1. SEFA Disclosure Checklist
2. New Developments
3. Complimentary Prior Year Single Audit
Review – email Kathy at
kathy.beck@beckcpas.com

19. Beck & Co.
Your TotalAccounting Partner
We have a broad base of managerial accounting and systems
experience and a deep understanding of nonprofit process and
technology that enables us to apply knowledge from the past,
together with up-to-date best practice know-how to help you solve
your challenges and capitalize on the opportunities you face. We
partner with you in each of your engagements, getting to know you
and your unique challenges and objectives intimately. This
combination enables us to develop tailored solutions to increase your
effectiveness and help you achieve the goals of your Mission.
www.BeckCPAs.com
Kathy.Beck@BeckCPAs.com
703-834-0776 extension 8001