< Back to Thought Leadership

NFPs With Operations In Indiana – Be Aware Of Unique State Audit Requirements

The Indiana State Board of Accounts (SBA) has the responsibility of examining the accounts and financial records for all state entities and entities receiving public money within the state of Indiana. A non-governmental entity that disburses public funds may be subject to the Indiana state audit requirements. An entity is defined as a provider of goods, services, or other benefits maintained in whole or in part at public expense, or supported in whole or in part by appropriations, public funds, or taxation.

What this means for your not-for-profit organization is that if you receive public funds (federal, state, or local funding), while you might not be subject to an audit in accordance with the federal requirements under Uniform Guidance (referred to as a Single Audit), you might have a State of Indiana audit requirement.

In order to monitor compliance with state regulations, the state requires the annual filing of the E-1 Annual Entity Report with the Indiana State Board of Accounts by not-for-profit entities receiving public assistance. The E-1 report is due 60 days after the entity’s year-end and details all funds received and disbursed from all federal, state, and local government agencies.  Funds received are categorized into four categories:

  • direct federal grant
  • federal grant passed through state or local government
  • fee for service
  •  and state and local

Determining the category into which your funding is classified can have an impact on whether the funds are subject to audit. These categories are defined by the state in the Indiana Gateway Users Guide. The State Board of Accounts will ultimately determine the classification of funds and from the E-1 submitted, will determine whether an audit is required, or a waiver is granted. Organizations participating only in nonfederal “fee for service” arrangements are not subject to the audit and reporting requirements.

Generally, the state requires an entity-wide audit when 50% or more of the funds expended by the entity are from a public source. Not-for-profit entities with disbursement of public funds that are less than 50% of total funds expended, or greater than 50% but less than $200,000, can be granted a waiver by the State Examiner. This calculation is dependent upon the type of funding received. Certain funds may not be included in the percentage calculation. Therefore, as noted above, it is important to classify the type of public funding accurately to ensure the SBA has correct information to make a proper determination.

The entity will be notified by the SBA of its audit requirement or waiver granted. Those entities requiring an audit should follow the audit process as outlined in the Uniform Compliance Guidelines for Examination of Entities Receiving Financial Assistance from Governmental Sources as published by the SBA. Those granted a waiver will be required to provide other information. Please note that a waiver of the state requirement might not relieve the organization of a required Single Audit under Uniform Guidance.

If you have questions or would like to know more, please contact Chris Mickelson at cmickelson@blueandco.com.

 

Tax Reform Resource Center

Read More Thought Leadership Articles Like what you read? Subscribe to our newsletter. Click Here.

Identify the best tax planning strategies for you. Click here to go to our 2018 Year-End Tax Planning Guide.

Recent Articles

2019 – Significant Tax Law Changes for Individuals

Significant Tax Law Changes for Individuals in 2019

As the result of the Tax Cuts and Jobs Act (TCJA), many changes to the tax law went into effect in 2018 and either apply through 2025 or are now permanent. However, there are two major changes enacted by the TCJA which take effect beginning in 2019. Here’s a closer look. 1. Medical Expense Deduction […]

Learn More
What’s Your Business Exit Plan_ Make It Part Of Your Tax Planning.

What’s Your Business Exit Plan? Make It Part Of Your Tax Planning

It may seem odd to develop a business exit plan this soon, but you must look out for your own financial future. You have to consider your company’s income and expenses and applicable tax breaks (especially if you own a pass-through entity). For example, you need to develop an exit strategy so taxes do not […]

Learn More

IRS Waives Penalty for Some Who Underpaid Their Taxes in 2018

If you didn’t adjust your withholdings or estimated tax payments in 2018 and now owe tax, you could qualify for penalty relief. On January 16, 2019, the Internal Revenue Service announced that it is generally waiving the estimated tax penalty for taxpayers who have paid at least 85% of their total tax liability during the […]

Learn More