Even when you have a strong reporting team and positive audit results or audit results with only minor deficiencies, the IRS, the Department of Education, the Department of Labor and/or other regulatory agencies may want to take a closer look at the information you submitted. The first reaction to a notice of a federal audit or review may be panic, but not-for-profit organizations can more efficiently react if they approach the request as a new—albeit significant—project.
When federal agencies have questions about your organization’s reporting, they will want to review a host of paperwork that supports the information you compiled. Putting a regulator response plan in place helps manage the review process. Organizations that follow four simple steps may find that an in-depth examination from a regulator is no cause for alarm.
Find a Project Manager
A review from a federal agency is as much about project management as it is about the source of the compliance concern. Not-for-profit organizations should designate a point person to spearhead the regulator review. This project manager should set goals based on the desired outcome, which in this case, would likely include a complete review of the documentation requested by the regulator. Goals should also include understanding the core issue at the root of the deficiency and creating a policy to remediate that issue in the future.
Project managers should build a cohesive, cross-departmental team and use the team to break down the requirements into specific tasks. Capable, responsible and respected task leaders can help divide the workload and keep the process moving forward. Setting timelines, both for individual tasks and the overall project, can also keep review efforts in motion.
Create a Practical File Review Process
When combing through information requested by a regulator, your organization will want to ensure that it doesn’t overlook valuable data. A practical file review system should be developed to compare different information sources, review them for discrepancies and complete and verify corrections to the appropriate verification system. For example, if the request for additional information came out of a finding on incorrect reporting of student enrollment data changes to the Department of Education (DOE), your information review process would likely need to compare the information in your organization’s student information software to the information reported to DOE. Corrections would then have to be made as appropriate.
Amend Existing Practices to Ensure Future Compliance
Correcting the underlying compliance issue is only part of the remediation effort. Once your organization gets to the root of the problem and addresses the regulator review, it will want to design, document and implement revised policies and procedures to ensure error-free reporting in the future. Employees will need to be trained on the new procedures.
Make Best Practices Part of Routine Training
Regulations are constantly changing, and it is essential that the decision-makers at your organization stay on top of updates. Attending industry conferences and seminars or participating in relevant associations can help your personnel stay informed on new developments. Cross-training staff is also essential to cover periods of employee turnover.
When a major regulatory development occurs that affects multiple departments, such as the release of the Uniform Grant Guidance, the revenue recognition standard and the revisions to not-for-profit financial statements, consider creating a cross-departmental team to evaluate the effect of adopting the new regulations. Cross-departmental teams may help create an environment of open communication so that decisions are not made without considering the impact on other operational areas.
Regular inspections through either a formal internal audit process or a more informal inspection by internal personnel may also proactively indicate where reporting practices could be improved. Findings in these types of inspections may help organizations correct deficiencies before they lead to compliance issues.
For more information about how your organization can be prepared to address regulator concerns, please please contact us.
Michelle Spriggs is a Shareholder in the Not-For-Profit & Education Practice. She can be reached at 774.206.8336 or MSpriggs@cbiztofias.com.
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