The Louisiana Legislative Auditor has prescribed statewide agreed-upon procedures for governmental and quasi-public entities, including non-profits. These procedures are effective beginning with those entities that have a June 30, 2017 fiscal year-end and are only required to be performed when the entity must have an audit in accordance with LA R.S. 24:513 (the audit law).
The procedures are directed toward specific areas of operations where fraud and abuse, noncompliance, or internal control deficiencies have been found to be at higher risk by the Legislative Auditor. Such areas include credit card purchases, contracting, travel costs, ethics law matters and others. These agreed-upon procedures (AUPs) are intended to represent a minimum level of additional work to be performed. These procedures may be considered to be “complementary” rather than “additive,” depending on the extent to which previous audits considered these areas in development of the auditor’s opinion on the financial statements as required by generally accepted auditing standards.
As a non-profit these procedures may or may not apply to you. It will depend on whether you meet the definition of a quasi-public agency. A quasi-public entity is considered an agent of public entities. In other words, the quasi-public stands in the shoes of public entities, performing governmental functions. The quasi-public, therefore, must report in detail on the public funds it receives and how those funds are expended. If public funds are commingled with private funds, a quasi-public must report all funds it receives.
Quasi-public defined – do I meet the definition?
For your consideration in determining whether you are a quasi-public agency, a quasi-public agency is defined as follows:
You are a quasi-public entity – which funds should be included for these procedures?
For non-profit entities that are considered to be quasi-public entities, only those AUPs relevant to public monies (and only to the extent that the AUPs are applicable) are required to be included in the scope of the AUP engagement. For example, if a nonprofit receives $10 million in non-public funds and also receives $600,000 in public funds, only the $600,000 would be subject to these AUPs if the funds are not otherwise commingled. In this example, if the non-profit did not use the $600,000 in public funds for payroll or travel expenses, the portions of the AUPs relating to these areas are not required to be included in the scope of the AUP engagement or report. If, however, these funds were commingled, and a separate accounting is not maintained by the organization these agreed upon procedures should be applied to all funds of the organization. For example, if a nonprofit receives $10 million in non-public funds and also receives $600,000 in public funds, all $10,600,000 of funds would be subject to these AUPs and all related procedures as it relates to all expenses of the organization are would be considered in the populations used in performing them.
These procedures may increase the time and effort required to complete the audit and potentially its costs. Additionally, since the auditor’s scope is now enhanced, increased detection by the auditor of fraud, abuse, noncompliance and internal control matters could occur. You should review the agreed-upon procedures closely to address areas of operations and internal controls subject to the procedures.