by David Sherdel, Director

As more not-for-profit organizations get federal funding, those that spend $750,000 or more in federal awards during a fiscal year must comply with specific regulations, including the requirement to undergo a Uniform Guidance audit. For audits with periods beginning on or after October 1, 2024, this $750,000 threshold increases to $ 1 million.

Not-for-profit organizations required to undergo a Uniform Guidance audit (also known as a Single Audit) must enlist a qualified accounting firm – such as Dembo Jones – to conduct the audit. Preparing for this process, especially the first time, can be cumbersome, but by taking the following steps, your organization can ensure a smooth and successful result.

1. Understand the Requirements of Uniform Guidance
Title 2 of the Code of Federal Regulations (CFR), Part 200, otherwise known as the Uniform Guidance, outlines the requirements for federal awards management and the associated audit requirements for not-for-profits. Familiarize yourself with Subpart F, which details the audit requirements, the scope of the audit, auditor responsibilities, and your organization’s responsibilities.

2. Assess Your Internal Controls
Internal controls are important to any successful audit because they help ensure compliance with federal regulations, maintain accurate financial statements, and protect an organization’s resources. Evaluate your internal controls for financial reporting and compliance with federal programs to identify weaknesses, and then take corrective actions, such as implementing stronger segregation of duties, enhancing documentation procedures, or providing additional training to staff. (Read our Insight about how to develop internal controls here.)

3. Maintain Complete and Accurate Records
Your auditors will evaluate (or “test”) your financial records, grant agreements, and compliance with federal requirements. All your records related to federal awards should be complete, accurate, and easily accessible. This includes copies of grant agreements, expenditure records, payroll records, evidence of approvals, and any documentation supporting the use of federal funds. A best practice is to implement a centralized record-keeping system to make document management easier.

4. Review and Update Policies and Procedures
Your organization’s policies and procedures should follow the Uniform Guidance requirements. Pay particular attention to procurement policies, time and effort reporting, subrecipient monitoring, and conflict of interest policies. Any policies that do not meet the standards in the Uniform Guidance should be updated or implemented, and all staff members should be aware of and follow these new policies.

5. Perform an Internal Compliance Review
Before your auditors begin, you can conduct an internal compliance review to check that all the Uniform Guidance requirements are met. This review should cover key areas such as allowable costs, procurement procedures, reporting, following the terms of the grant, and financial reporting accuracy.

An internal review helps identify potential compliance issues and makes sure that any discrepancies are addressed before the external auditors begin their work. Staff should also become familiar with the audit process and be prepared to provide necessary documentation and explanations. This proactive step can significantly reduce the risk of the audit having reportable findings.

6. Train Staff on Compliance Requirements
All staff involved in financial management, procurement, and grant administration should be made aware of Uniform Guidance requirements and the importance of following the regulations. They should be instructed what to do if they think something isn’t correct, especially with the federal program.

7. Engage an Experienced Audit Firm
In a Uniform Guidance Audit, the organization being audited is responsible for finding – and paying for – an accounting firm to conduct the audit. The accounting firm you hire should have extensive experience in not-for-profit audits and know the Uniform Guidance. You should expect your accounting firm to conduct the audit efficiently and in a timely manner in accordance with professional standards, and to provide valuable insights and recommendations for improving your organization’s compliance and financial management.

Dembo Jones has that extensive experience conducting Uniform Guidance audits for not-for-profit organizations.

8. Communicate with Your Auditor Throughout the Year
By communicating with your auditing accounting firm throughout the year, you can avoid surprises during the audit. You can help make sure your organization stays in compliance with federal and accounting requirements by letting your auditor know of any significant changes when they happen, such as new federal awards or significant financial transactions. Also, ask your accounting firm for guidance on new or difficult transactions before entering into them.

9. Plan for the Audit Expense
Another way to avoid surprises is to budget for an audit. The expense is generally allowable as a charge to the federal award dollars, but you should confirm this in advance with your grantor. Be sure to plan ahead so funds are available to cover the audit costs, without harming your organization’s operations.

10. Stay Updated on Regulatory Changes
Federal regulations and accounting standards change frequently, so staying up-to-date is key to maintaining compliance. Consider subscribing to updates from relevant federal agencies, attend training sessions, and consult with your audit firm to remain aware of changes that could affect your audit requirements, financial reporting requirements, or compliance responsibilities.

With careful planning and attention to detail, your organization can navigate the Uniform Guidance audit process successfully. By understanding the requirements, strengthening internal controls, maintaining accurate records, and working closely with experienced professionals, your not-for-profit can meet the audit requirements, get the benefits of receiving federal funds, and continue to fulfill its mission with confidence.

The professionals at Dembo Jones have significant experience guiding clients through the audit process. We’re ready to guide your organization. Give us a call.