In this video about not-for-profit organizations, Carl Thomas, a manager at Cray Kaiser, explores how federal and state funding can impact the regulatory compliance for nonprofits. He takes a close look at how uniform guidance audits can present valuable opportunities for growth and improvement.

Transcript

I’m Carl Thomas. I’m a manager at Cray Kaiser. Many not-for-profit organizations receive federal funding, even state funding, perhaps. Now, this can have certain implications for your regulatory compliance. One thing that can happen is over $750,000 of federal awards can qualify you for what we call a uniform guidance audit. This is an audit that requires the auditor to gain an understanding of the internal control over compliance with the federal grants. It also requires an actual compliance audit. So we would test the compliance with that grant. It definitely adds some time to the project. And it can also give you some insights into how you’re managing these grants and what can, you know, if there’s any room for improvement.

If there’s certain state awards as well. So when we talk about state awards, we mean state of Illinois, perhaps the Department of Commerce and Economic Opportunity, perhaps the Department of Human Services, even the State Board of Education is one that will provide state awards. And when I say state awards, I mean awards that are derived from state revenues. So a state agency may administer a federal award as a pass-through. So that’s important to understand as well. There is a distinction there. Now, when state awards are involved too, and federal awards, you may have what we call a GATA implication in the state of Illinois. Now, this is similar to a uniform guidance opinion and requires the submission of what we call a CYEFR, a consolidated year and financial report.

Now, as a result of potentially having a federal audit or certain implications of the GATA requirement in Illinois, your organization may find themselves in a position of receiving maybe an audit finding. However, it’s not really a negative thing. It’s really an opportunity for improvement, right? The auditors are looking at transactions in detail, they’re testing internal controls with grant compliance and things. And in an intensive audit, you’re bound to almost have some suggestions and value add things that come out of that. However, again, it shouldn’t be seen as a penalty. It should really be seen as an opportunity for growth. Because in the next year, it’s an opportunity to improve on that matter and take that finding away, quite frankly, with action on your part. And so there can be some value there.

Well, thank you for tuning in today. If anything we’ve talked about is resonating with you, or sounds like something you want to discuss further, please feel free to call the dedicated Cray Kaiser not-for-profit team. We’re always available. The number is listed on our website. You can ask for Carl or Amy to start, but anyone can point you in the right direction. Thank you.