Chapter 4 -
Case 4 – Single Audit versus
Program-Specific Audit
Learning Objective
• Examine issues regarding the determination of whether a single audit or program-specific
audit is appropriate.
A Surprise
The Raiders of the Lost Art, a small non-profit located near Niles, Ohio, is devoted to rescuing
stolen artwork and returning these treasures back to their rightful owners. Sam Pharaoh has been
the Treasurer of the Board and historically prepared the organization’s IRS Form 990 without
any major difficulties.
But, once upon a time, Sam received a notice from the Institute for Museum Services asking for
a copy of their single audit for 20X1. Sam responded that the Raiders of the Lost Art had never
had one single audit conducted and the Board, as a whole, felt that the need for even one single
audit was not necessary. Sam also thanked the Institute for Museum Services for their concern;
however, the Board was very capable of managing their own affairs and did not need
interference from the federal government.
A few weeks later, Mia, the receptionist of the Raiders of the Lost Art, received a phone call
from Lars Brother from the Institute for Museum Services. Lars indicated that they were in
receipt of a letter signed by Mr. Pharaoh, in which Mr. Pharaoh indicated that a single audit was
not conducted. Lars went on to explain to Mia that, since the Institute for Museum Services had
provided the Raiders of the Lost Art with a $600,000 federal grant which was fully expended in
20X1, OMB Circular A-133 was applicable and, as a result, an audit would be required.
Mia, relayed the following message to Stephanie Spielberg, Executive Director. “Someone, I
think it was your brother, called from the Institution of Foreign Services – I think they do
maintenance – and said that the Circular was being applied to the Omni and that you are being
audited.”
After taking a few (okay, several) aspirins, Stephanie, returned the phone call to Lars
(unbelievably Mia actually got the phone number correct) who again explained the requirements.
Stephanie decided to contact Sam and suggest that they get Garrison Chevy’s input. Garrison is
a local CPA with extensive auditing experience.
At first Sam resisted, indicating that all CPAs charge exorbitant rates for doing very little. Sam
also indicated that the money could be better spent on salary – after all, his daughter Mia (that’s
right, Mia Pharaoh), had not received an increase in over four months.
After some arm twisting (literally), Sam agreed to have Stephanie contact Garrison. Garrison
was asked to provide the Board with some information regarding OMB Circular A-133.
Garrison attended the next meeting of the full Board of the Raiders of the Lost Art and explained
in laymen’s terms (it is possible) the requirements of OMB Circular A-133 and the Single Audit
Act Amendment of 1996. Garrison explained that the audit would be an organization-wide audit
and that internal controls and compliance with applicable laws and regulations would have to be
applied.
Georgia Lucas, Board President, raised some concerns regarding the fact that the organization
had never established controls over many areas of their operations due to the lack of people and
funds.
Garrison, who was unfamiliar with many details of the organization’s operations asked to see the
results of their prior audits.
Sam explained that in their entire existence they had never had a single audit conducted.
Garrison asked whether a Yellow Book audit had been conducted.
Sam again explained, louder this time, that they had never had a single audit conducted.
Garrison again asked, whether a Yellow Book audit or a GAAS audit (not a Single Audit) had
ever been conducted.
Sam explained, slowly this time, that no single audit had ever been conducted in a yellow book, a
blue book, a pink book, a red book, or a black book – none were conducted. Sam, exasperated
now, explained that the non-profit owned no vehicles so no one ever saw a need to audit gas
purchases; however, now that Garrison brought it up, he was a little concerned about some of
Stephanie’s mileage reimbursements.
At this point, Garrison realized that no single audit, let alone a Single Audit, had ever been
conducted.
As a result, Garrison asked about where the Organization’s revenues came from in 20X1.
Stephanie explained that Raiders of the Lost Art depends upon contributions and fundraisers for
much of their support; however, during 20X1, she had pulled some strings with some politicians
to see if any grant moneys were available. One of these politicians was able to secure a one-time
grant from the Institute for Museum Services for $600,000.
Garrison finished by saying that a program-specific audit might be a viable alternative to the
organization-wide single audit for the Raiders of the Lost Art. Garrison admitted that, while he
conducted many single audits, he had never conducted a program-specific audit for a federal
award.
Garrison informed the Board that he would investigate the requirements for a program-specific
audit and get back to them regarding his recommendations for how they should proceed.
733033
0
Customer Service
Customer Service
Customer Service
Back to Browsing Products