'Single Audit' Makes Sense

Given that concerns about accountability in financial management are currently at an all-time high, better government oversight over the nonprofit sector seems reasonable. But not all approaches are equal. I think it’s time for New York State to parallel the federal audit requirements of Office of Management and Budget (OMB) Circular A-133, commonly known as the single-audit system.

The federal Government Auditing Standards (known as the Yellow Book) contain standards for uniform audits of government organizations, programs, activities, and functions, as well as government assistance received by certain organizations. The federal government, through the OMB, issued Circular A-133, which sets forth standards for consistency and uniformity among federal agencies for the audit of nonprofit organizations expensing federal awards. This means that all nonprofits that receive direct or indirect federal funds above a specified threshold have one comprehensive audit performed, regardless of which federal agency provided the grant.

In New York State, however, a nonprofit that receives funding from multiple agencies at the state and local levels is required to file different reports with each one, with no standardization in reporting. An unintended consequence is that complying with many different audit requirements is time-consuming, expensive, and counterproductive for both the nonprofits and the government entities that audit them. Many New York state and local agencies either do not accept a federal OMB A-133 audit or require their own audit in addition to it. Although the funding recipient may be reimbursed for its Yellow Book or A-133 audit, many nonprofits are forced to use resources that would be better applied to their mission.

A certain amount of the work in these different audits is the same for each, and the duplication of effort in complying with different funders’ audit requirements can be significant. Many nonprofits need to have staff dedicated solely to managing work with outside auditors.

To provide perspective on the complexity of the problem, consider that New York, with its 62 counties, has potentially 62 sets of standards. In addition, New York State has more than 60 individual cities, 900 towns, 500 villages, and approximately 750 school districts. Each governmental unit can have its own systems and forms for audits of nonprofits that they fund.

A different approach is embodied by the single audit: Having audits of entities receiving state assistance parallel the federal requirements promotes audit economy and efficiency. Many other states have single-audit programs, including Connecticut, Florida, New Jersey, North Carolina, and Pennsylvania.

Last November, New York City Mayor Michael Bloomberg established six formal workgroups in such areas as integrity, timeliness, and performance of city contracts; and single audits of nonprofit organizations that receive city funding. The NYSSCPA will support this workgroup.

When those workgroups were announced, the NYSSCPA was already considering calling upon Governor George Pataki, State Comptroller Alan Hevesi, Mayor Bloomberg, New York City Comptroller William Thompson, and county executives across the state to agree to a single set of standards for audits of New York nonprofit organizations. Last month, the NYSSCPA’s Not-for-Profit Organizations Committee passed a resolution asking our Board of Directors to take a position. To that end, I’m asking NYSSCPA members who agree to write to Governor Pataki and Comptroller Hevesi in Albany. Members in New York City are also encouraged to write to Mayor Bloomberg and Comptroller Thompson.

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