Introduction to E1 Reporting
Effective September 1, 1986, the State Board of Accounts became responsible for the examination of the records and accounts of entities receiving financial assistance from governmental sources.
Entities are defined as providers of goods, services, or other benefits that are maintained in whole or in part at public expense or supported in whole or in part by appropriations, public funds or taxation. The definition does not include the state or municipalities, but does include for-profit and not-for-profit corporations, unincorporated associations and organizations and individuals.
Financial assistance is defined as payments received in the form of grants, subsidies, contributions, aid, etc.
Entities are primarily nongovernmental organizations, many of which conduct their business as a not-for-profit corporation. By contract or other form of agreement, these entities provide a service or benefit to the public on behalf of and paid for by government.
IC 5-11-1-9 delegates the "oversight" responsibility of these entities to the State Board of Accounts. Specifically, the State Board of Accounts is to ensure that audits, in accordance with agency guidelines, are performed for all entities receiving financial assistance from state or local government sources. The State Board of Accounts is also required to establish a system of review, follow-up, and resolution of any findings of noncompliance identified during the audit process.
All entities receiving assistance from state and local government, involving federal or non-federal dollars, are subject to audit by State law.
IC 5-11-1-9 requires an organization-wide audit of an entity when the public funds disbursed by that organization are equal to or greater than 50% of its total disbursements. The State Examiner may waive the audit requirement if the public funds disbursed are less than 50% of its disbursements or if public funds disbursed are at least 50% of total expenditures but public funds expended are less than $200,000 ($750,000 effective 7/1/19).
Additionally, fee-for-service arrangements with governmental entities are required to be reported on the E-1 report per the Uniform Compliance Guidelines. It will be the determination of the State Board of Accounts and not the entity, as to whether the funding arrangement meets the definition of fee-for-service. Copies of the contracts and other information may be required to be submitted and will be reviewed to determine the proper categorization of funding.
Entities subject to the requirements of IC 5-11-1-9 are required to file an Entity Annual Report (E-1) with the State Board of Accounts annually. This submission is due within sixty days of the entity’s fiscal year-end. This report provides general information about the entity and also discloses the public funds received and disbursed during the year. Based on the financial information reported, we advise the entity if an audit is required or if the entity qualifies for a waiver of this requirement. It is, therefore, very important that public funds received and disbursed by the entity be properly reported in the Entity Annual Report. An audit waiver granted by the State Examiner applies only to the audit required by I.C. 5-11-1-9. It does not waive any other audits that might be required by 2 CFR part 200, subpart F, Federal OMB Circular A-133 or contractual agreements with grantor agencies. Therefore, it is possible that an entity receiving a waiver from the State Board of Accounts will still be required to have a federal audit performed.
Since the purpose of the Entity Annual Report is to determine the audit requirements placed on your entity by IC 5-11-1-9 it is important that you report "government funds" in accordance with the preceding paragraphs. Failure to properly report "government funds" could result in a violation of IC 5-11-1-9 and possibly other statutes.
This report is used to determine your STATE audit and reporting requirements. Your entity may be subject to other audit and reporting requirements (specifically 2 CFR part 200, subpart F, Federal OMB Circular A-133 or other contractual agreements with the grantor agency). Please contact the grantor agencies for help in determining your entity's overall audit and reporting requirements. If your entity receives both direct Federal awards and state or local funds, we recommend audit arrangements to meet both requirements.
If your organization receives federal funds, please note that the threshold requiring an audit under 2 CFR part 200, subpart F has increased significantly. It is possible that an organization exempt from federal audits, will still need to have an audit performed under IC 5-11-1-9. In these instances an audit done in accordance with generally accepted auditing standards (GAAS), rather than generally accepted government auditing standards (GAGAS), will suffice, if this is acceptable with your funding agencies.
Shortly after the date you submit the Entity Annual Report in Gateway, you will be notified via e-mail if an organization-wide audit is required, or if you qualify for a waiver of the State requirements. If you qualify for a waiver, you will receive notification via email that a tentative waiver is being granted and you must supply us with financial information supporting the amounts reported on the Entity Annual Report. The notification will instruct you on the supporting documentation that you are to supply in order to complete the waiver process. Supporting documentation should be uploaded using the “Upload Files” option in the Main Menu. If you have qualified for a waiver in the prior year and believe you will qualify in the current year, you may upload the supporting documentation at the time of submitting your Entity Annual Report. If in fact you do qualify for a waiver, a final waiver of audit notification will be sent, completing the process. All organizations qualifying for a waiver will be processed as such.
Once an entity is notified of their audit requirement, they should confirm with their funding agencies the type of audit required, and begin the process of evaluating and selecting an auditor. After the entity has selected their auditor and confirmed the type of audit required, a copy of the contract should be submitted to the State Board of Accounts for review and approval. This may be submitted in the Upload Files section of Gateway or via email at email@example.com. You will be notified by email when your contract has been approved. Upon approval of the contract, the audit should begin.
Upon completion of field work, the auditor should advise the entity and the State Board of Accounts of the date, time and location of the entity’s exit conference. Upon completion of the audit, a copy of the report should be submitted to all funding agencies and the State Board of Accounts. This should be submitted as an unlocked PDF file either in the Upload files section of Gateway or via email to firstname.lastname@example.org. A copy of the governance/management communication letter is also required to be submitted and should be submitted as a separate file from the audit report. This letter should also be submitted in the Upload files section of Gateway or via email to email@example.com. Upon receipt of the audit report, funding agencies will commence their review/resolution process, and the State Board of Accounts will commence the quality control review of the auditor’s work. Upon completion of the quality control review by the State Board of Accounts, the audit report is made available for public inspection by this department.
More information may be found regarding this process on the State Board of Accounts webpage at www.in.gov\sboa. The applicable manual is the Uniform Compliance Guidelines for Examination of Entities Receiving Financial Assistance from Governmental Sources listed under Guidelines for Independent Auditors.