Single Audit. Background, Mountain Lake Mental Health Affiliates, a nongovernmental not-for-profit organization, has contacted Rill Wise, CPA,
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Facts. In discussions with Mountain Lake’s controller, Mr. Wise obtains the following information about the organization for the year just ended:
1. Mountain Lake received a $200,000 grant from the City of Mountain Lake, of which 50 percent was stated as being from federal sources. Of this amount, $150,000 was expended during the year, equally from federal and nonfederal sources.
2. Unrestricted gifts of $50,000 were received from private donors; $40,000 was spent during the year.
3. The organization received $300,000 from Medicare for mental health services rendered during the year.
4. A building owned by the U.S. Department of Health and Human Services is occupied by Mountain Lake for rent of $1 per year. The fair value of the rental has been appraised at $30,001.
5. Mountain Lake carried out a program with the Federal Bureau of Prisons to provide alcohol and drug abuse counseling services for prisoners at a nearby federal prison. Services are provided on a “units of service” reimbursement basis. Each unit of service is reimbursed at the rate of $100 and the contract provides for maximum reimbursement of $400,000. Actual units of service for the year were 4,400. Direct costs incurred for these services amounted to $250,000 in total.
Required
a. Based on the foregoing facts, is Mountain Lake Mental Health Affiliates required to have a single audit? Explain your answer.
b. Should Mr. Wise accept the audit engagement for a $5,000 fee? Why or why not?
c. Would Mr. Vise be considered independent according to Government Auditing Standards if he also prepares routine tax filings for the organization? Why or why not?
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For
Accounting for Governmental and Nonprofit Entities
ISBN: ?978-0073379609
15th Edition
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus
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