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7 Audit Criteria for Allowable Costs
February 23, 2009
By: The NonProfit Times
In addition to being prepared for audits when federal funding comes into play, nonprofits also must know something about what kinds of costs are allowed.
Office of management and budget (OMB) Circular A-122 establishes principles for determining cost of grants, contracts and other agreements between nonprofits and the government.
Speaking at an AICPA Not-For-Profit Financial Executives Forum in Anaheim, Alex Weekes of ML Weekes & Company, PC, offered advice on allowable costs and factors affecting allowability.
The general criteria are that the costs:
- Be reasonable for the performance of the award and be allocable (tied to cost objective, contract and service and proportional to benefits) thereto under these principles;
- Conform to any limitations or exclusions set forth in the principles or in the award as to the type or amount of cost items;
- Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the organization;
- Be accorded consistent treatment;
- Be determined in accordance with generally accepted accounting principles (GAAP).
- Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period; and
- Be adequately documented.