On February 10, 2017, the Louisiana Legislative Auditor (LLA) initiated statewide agreed-upon procedures (AUPs) affecting local governments and quasi-public organizations, including nonprofits. Those affected are entities that are required by Louisiana Revised Statutes 24:513 to submit audited financial statements to the Legislative Auditor. The new procedures will be effective beginning with entities that have a year end of June 30, 2017, and must be performed under AICPA attestation standards.
As one of these entities, what do I need to know?
- The AUP report covers a wide range of areas: written policies and procedures; boards (or finance committees, if applicable); bank reconciliations; collections; disbursements general; credit cards/debit cards/fuel cards/ P-cards; travel and expense reimbursement; contracts; payroll and personnel; ethics (excluding nonprofits); debt service (excluding nonprofits); and others.
- The procedures must be conducted by the same firm that performs the annual audit; as a result, a separate “engagement approval form” for the statewide AUP engagement is not required.
- The agreed-upon procedures report will have to be submitted along with the audit report when submitted to the LLA. Specifically, the AUP report must be attached to the audit report that is submitted to the Legislative Auditor’s office (i.e., one Adobe PDF file submitted to the LLA rather than two).
- Procedures may be performed on a different annual period (within three months) of the entity’s fiscal year. In the LLA’s general comments, the following example is provided: the practitioner may perform AUPs for the fiscal period April 1, 2016 through March 31, 2017, for an entity with a fiscal year ending June 30, 2017.
- Exemptions: State entities that are included in the Comprehensive Annual Financial Report (CAFR) of the State of Louisiana and entities in St. Tammany Parish subject to Act 774 are exempt from performing the statewide agreed-upon procedures.
Where do I begin?
First, you will want to determine if the procedures apply to your entity.
- If you are a governmental entity that has revenues of $500,000 or more, you are impacted.
- Nonprofits are also required to comply if they receive $500,000 or more in state or local government assistance, including federal assistance passed through the state. According to the LLA, “For nonprofit 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.”
Next, review the procedures in preparation for your annual audit.
Finally, anticipate that your fee for the annual audit may increase. The LLA purports that the AUPs should be considered “complementary,” not “additive.” This may depend, however, on how your current auditor already tests these areas, as some areas may not typically be tested in an audit of financial statements. This is why it is reasonable to anticipate that fees for the annual audit will increase, since the AUP may require increased review by your auditors.
Our professionals have deep experience performing agreed-upon procedures under AICPA attestation standards, including performing procedures required under Act 774, which applies specifically to entities in St. Tammany Parish. Members of both our Nonprofit Industry Group and Public Sector Industry Group are available to discuss concerns you may have about this AUP or other issues.