Circular No A-133 -- Audits Of States Local Governments And Non-Profit Organizations: Fill & Download for Free

When a nonprofit organization or an NGO accepts a federal grant, it usually must comply with Circular A-110 “Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations”. It is a 54-page document and a dense read for most people. Non-compliance risks revocation of the grant award.https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-110.pdfThe organization must also comply with federal cost principals, in accordance with Circular A-122 “Cost Principles for Non-Profit Organizations.” It is a 55-page document that goes into great detail and might be challenging to completely understand if not an accountant. Non-compliance risks revocation of the grant award.https://www.whitehouse.gov/sites/whitehouse.gov/.../circulars/A122/a122_2004.pdfThe organization often must undergo a financial and compliance audit, at its own expense. The audit must be in compliance with Circular A-133 “Audits of States, Local Governments, and Non-Profit Organizations.” It is a 33-page document, and a difficult read for anyone who is not an experienced auditor or accountant. Non-compliance risks revocation of the grant award.https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A133/a133.pdfIn addition to the above documents, the federal agency that awards a grant may have its own circulars with its own rules. For example, grants awarded by the U.S. Department of Justice are usually subject to the DOJ Grants Financial Guide, which is a 164-page document. Non-compliance risks revocation of the grant award.https://www.whitehouse.gov/sites/whitehouse.gov/.../circulars/A122/a122_2004.pdfSome offices within federal agencies issue additional rules for grants they award. For example, the Office of Justice Programs, within the U.S. Department of Justice, offers a web site of links to rules and regulations to which its grant recipients are subject.https://ojp.gov/funding/Explore/LegalOverview/MandatoryTermsConditions.htmEgregious actions that are contrary to these rules can potentially result in arrest of the perpetrators, a criminal trial, and imprisonment.Finally, when a federal grant award is accepted, information on the grant is generally available to the public.https://www.usaspending.gov/#/

A nonprofit organization, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is dedicated to furthering a particular social cause or advocating for a shared point of view. In economic terms, it is an organization that uses its surplus of the revenues to further achieve its ultimate objective, rather than distributing its income to the organization's shareholders, leaders, or members.Nonprofits are tax exempt or charitable, meaning they do not pay income tax on the money that they receive for their organization. They can operate in religious, scientific, research, or educational settings.Accounting Standards for NonprofitsNonprofit organizations are entities that perform charitable services by accepting funds from the general public. To help regulate activities and encourage the proper use of funds, accounting standards are in place to assist management and auditors when preparing financial statements and performing engagements. Although the accounting standards are complex, the standards are necessary to promote comparability between organizations and protect the general public.PurposeBecause nonprofit organizations exist to accomplish a goal and not to return a profit, standards are structured to illustrate the success of a program or activity, rather than emphasize net income. For donors to understand how an entity is accomplishing its goal, the standards require financial information to be presented in a prescribed format. According to the codification of accounting standards, the primary purpose of financial statements of nonprofit entities is to provide relevant information to meet the common interest of donors, members, creditors and others who provide resources to nonprofit organizations.SignificanceAccounting standards affect readers of financial statements by changing the presentation of statements for nonprofit organizations. As a result, the financial statements of nonprofit organizations differ from a for-profit entity, such as a corporation. For instance, the basic financial statements of an entity formed to produce income are the balance sheet, income statement and the statement of cash flows. While a nonprofit entity also has a statement of cash flows, the balance sheet is replaced with a statement of changes in net assets and the income statement is replaced with the statement of activities.FunctionThe accounting standards are used by management of nonprofit organizations as a guide to record transactions and comply with program requirements should the entity receive government funding. The standards are applied continually and become more complex as the entity receives different types and levels of funding. Regardless of the complexity, management and the board of directors a nonprofit organization are responsible for knowing and implementing the contents of accounting standards.StandardsNonprofit entities are required to adhere to accounting principles generally accepted in the United States. These standards are established by the Financial Accounting Standards Board and are found in FASB’s accounting codification. Specifically, industry standards for nonprofits are located in Section 958 of the accounting code. In addition, nonprofit organizations that receive government funding and undergo a financial statement audit are subject to governmental auditing standards issued by the Comptroller General of the United States. Furthermore, nonprofits that receive more than $500,000 in governmental funding must adhere to Circular A-133, Audits of States, Local Governments and Non Profit Organizations published by the Office of Management and Budget .ConsiderationsThe complexity of accounting standards for nonprofit organizations increases the cost of maintaining books. A nonprofit organization must acquire management with a certain level of expertise and educate staff of the applicable standards. In addition, the cost of a financial statement audit increases depending of the level of government funding.