Government Funding Requirements

Does you organization receive support from the federal, state, or a local government?  If so, you may have some additional reporting requirements.

Government support can come in many forms.  The more common means are as follows.

• Direct federal grant – Grant funds received directly from a federal agency
• Federal grant passed through a state or local government – Federal grant first received by a state agency or local unit of government, and then sub-granted to your organization.
• Fee for service – Reimbursement based on a specific “per diem” or “per unit” rate for services actually provided
• State and local – Non-federal funds received from a state agency or local unit of government

Nonprofits can also receive government support through loans, loan guarantees, property, interest subsidies, insurance, cooperative agreements, and other noncash assistance.

It is important to understand the initial source of the funds.  As noted above, it is common for the federal government to fund a state agency that then passes those funds onto a nonprofit.  In other circumstances government money may be granted to one nonprofit and then to another nonprofit.  In both cases, the funds are considered government support since the initial funding source is a government entity.

Entity Annual Report

If your organization is an Indiana entity and you receive government funding, you are required to file an Entity Annual Report, E-1, with the Indiana State Board of Accounts within 60 days of your organization’s fiscal year-end.  The State Board of Accounts will then determine if your organization is required to have an audit performed. In some instances, a waiver of audit may be granted.

Single Audit

If your organization spends $750,000 or more in Federal awards during a fiscal year, you are required to have an audit in accordance with the Single Audit Act.  This is to ensure that the money granted by the Federal government is properly spent.  In addition to determining whether the financial statements are presented fairly as with a normal financial audit, an audit under the Single Audit Act also determines whether the organization has met certain compliance requirements related to the government funding and tests internal controls over compliance.  Because of the additional requirements, these audits require more work and cost more than just a financial audit.  There are certain types of government funds that are not included in the calculation of the $750,000.  Contact your auditor to discuss your specific situation.

At the completion of a Single Audit, a Data Collection Form is also required to be filed with the Federal Audit Clearinghouse.  This form must be submitted within the earlier of 30 days after the receipt of the auditors’ reports or 9 months after the end of the audit period.

If your organization receives any type of government funding, it is important to make sure that you are tracking the source of funds and how much is being spent each year so that you can comply with both Federal and State requirements.

Contributed by: Carrie Minnich, CPA, MAcct | Director | DWD CPAs & Advisors