• A financial statement audit evaluates whether a company’s financials are fairly presented in accordance with applicable accounting standards. An integrated audit also includes an assessment of internal controls over financial reporting.

• Common audit mistakes include late or missing provided-by-client (“PBC”) requested submissions, insufficient or unreliable documentation that hinders effective risk assessment, weak internal and IT controls, and errors in applying accounting standards.

• Preparing early, understanding the internal control environment, and training staff can help your company provide relevant and reliable information, which is critical for assessing audit risk and demonstrating compliance with applicable laws and regulations.

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Financial statement audits are a critical checkpoint for companies, stakeholders, and investors. While the process has its limitations, the goal of an audit is to provide reasonable assurance that the company’s financial statements are free of material misstatement (whether due to error or fraud).

However, the audit process is only as effective as the broader environment supporting it — including timely and reliable financial information, a well-resourced accounting function, effective oversight by the board or audit committee, and a clear understanding of the entity’s operations and the regulatory landscape of its industry.

Many organizations approach audit season underprepared or unaware of the common pitfalls and complex or nontraditional transactions that can delay the process, increase costs, or raise compliance concerns.

In this article, we explain the financial statement audit process, common mistakes we see companies make during external audits, and best practices that lay the foundation for a smoother audit experience.

Understanding Financial Audits

During a financial statement audit, an independent registered public accounting firm follows generally accepted auditing standards (GAAS) and assesses your company’s financial records, transactions, and reporting processes. Independent auditors gather and evaluate relevant and reliable evidence to determine whether the financial statements are presented fairly — following generally accepted accounting principles (GAAP), international financial reporting standards (IFRS), or another applicable financial reporting framework.

The process typically follows these phases:

1. Audit planning and risk assessment: External auditors work closely with company management to understand the operations of the business, identify significant risk areas, and develop an audit strategy that is unique to the organization.

2. Internal control evaluation: The auditor assesses the design and operating effectiveness of internal controls over financial reporting, often through walkthroughs and targeted testing of key controls. The results of this evaluation directly inform the auditor’s risk assessment and the nature, timing, and extent of substantive audit procedures. In an integrated audit, this process also includes gathering information to develop an opinion on the effectiveness of internal controls. Auditors pay particular attention to information technology general controls (ITGCs), which are foundational to the reliability of automated processes and system-generated reports. If the auditors identify material weaknesses, they may need to disclose them in the financial statement footnotes or the auditor’s report (depending on the severity and context).

3. Substantive testing: The auditor gathers evidence by examining transactions, account balances, and disclosures through sampling, confirmations, and recalculations. Strong internal controls impact the audit team’s risk assessment and may allow the team to reduce the amount of substantive testing required.

4. Conclusion and reporting: The auditor drafts the opinion letter, communicating findings to management and those charged with governance.

10 Common Types of Mistakes Made in Public Audits

Despite best intentions, many organizations encounter issues during the annual audit that delay timelines, increase costs, or raise red flags. Here’s a look at some common mistakes and why they matter:

1. Inadequate Documentation of Internal Controls

Many companies fail to maintain sufficient documentation around their internal control procedures. This lack of documentation makes it difficult for auditors to understand and — if necessary — test the design, implementation, and effectiveness of key controls. As a result, auditors may need to perform additional walkthroughs or expand their substantive testing — potentially increasing audit costs and timelines.

For publicly traded companies, this issue can have additional implications under Section 404 of the Sarbanes-Oxley Act (SOX). Section 404(a) requires management to assess and report on the effectiveness of internal control over financial reporting (ICFR). Section 404(b) requires the independent auditor to attest to and report on management’s assessment for accelerated filers.

If the auditors deem internal controls ineffective, management must disclose material weaknesses in its annual filing with the SEC. This can affect investor confidence, internal resource allocation, and external perceptions of the company’s governance. These findings may also place added pressure on the accounting team to remediate deficiencies under tight deadlines while still managing the financial close and reporting cycle.

2. Late or Incomplete Audit PBC Requests

Prior to audit fieldwork, the audit team sends a “provided by client” (PBC) list to management outlining the documents and financial data auditors need. Submitting incomplete or delayed items stalls fieldwork and may increase audit fees.

3. Improper Revenue Recognition

Misapplying Accounting Standards Codification (“ASC”) 606 or lacking support for revenue transactions — including cutoff periods around year-end — is a recurring audit issue. Companies often struggle to identify and document performance obligations in their contracts with customers and allocate the transaction price appropriately among those obligations.

These issues are especially common in arrangements involving bundled products or services, where the timing and pattern of revenue recognition may differ by deliverable. Inadequate documentation or inconsistent application of these principles can lead to audit adjustments or the need for expanded testing.

4. Weak IT General Controls

Deficiencies in ITGCs — such as user access management, change management, physical security of IT systems, intrusion detection, and system backup and recovery processes — can compromise the integrity of financial reporting systems and result in control deficiencies or audit findings. Increasingly, cybersecurity risk is also a critical area of concern, particularly as companies face heightened exposure to data breaches and unauthorized access.

In cases where companies outsource key processes or use cloud-based platforms that affect financial reporting, it’s important to obtain and evaluate SOC 1 Type 2 reports from service providers. These reports help assess whether the third party’s control environment supports reliable financial reporting. Failing to obtain or properly review these reports can result in audit scope limitations or the need for additional procedures.

5. Errors in Lease Accounting

ASC Topic 842  introduced significant changes to lease accounting — increasing complexity in how companies identify, measure, and disclose lease arrangements. Common mistakes include misclassifying leases, failing to identify embedded leases in service or supply agreements, and incorrectly applying accounting treatment for lease modifications and remeasurement events.

Errors can also arise in calculating the right-of-use asset and lease liability, selecting the appropriate discount rate, and preparing the required footnote disclosures. These issues can lead to material misstatements and require substantial audit follow-up — especially when a company maintains a large or decentralized lease portfolio.

6. Inaccurate or Unsupported Estimates

Many key areas in financial reporting rely on management’s judgment, especially when it comes to technical estimates such as goodwill impairment, valuation of long-lived assets, fair value of debt or equity instruments, and contingent liabilities. These estimates require a disciplined process of identifying the appropriate valuation method, documenting key assumptions, and evaluating both supporting and contradictory information.

Errors often arise when companies fail to update assumptions based on current market conditions, skip critical steps in the impairment testing process, or use inconsistent inputs across related estimates. A lack of documentation or transparency around the basis of these estimates raises audit concerns and can result in restatements or material weaknesses in internal controls over financial reporting.

7. Failure to Perform Timely Reconciliations

Account reconciliations help ensure accuracy and reliability in financial statements by comparing information in your financial records with third-party support — such as bank statements or loan documents. Delayed or inconsistent reconciliations of bank accounts, intercompany balances, and key general ledger accounts can indicate larger issues with the financial close process.

8. Insufficient Segregation of Duties

In smaller or rapidly growing companies, it’s common for individuals to handle multiple steps within a transaction cycle — such as initiating, approving, and recording transactions. This increases the risk of errors and intentional misstatements.

A lack of proper segregation of duties introduces risk at the process level and signals broader weaknesses in the company’s control environment (a key component of internal control frameworks). When auditors identify these gaps, they may reduce their reliance on controls and expand the scope of substantive testing — increasing the time and resources required for the audit and potentially causing delays.

Strengthening segregation of duties supports the integrity of financial reporting and reinforces a culture of accountability.

9. Poor Communication Between Financial Reporting and Operational Teams

A disconnect between accounting and other departments — including operations, legal, and procurement — can result in incomplete or misclassified transactions and missed disclosures. This issue is especially common in areas like inventory management, project accounting, and deferred revenue recognition.

It can also impact the identification and disclosure of related party transactions, legal contingencies, and other matters that require input from departments outside of finance. For example, if legal teams do not communicate the existence of pending or threatened litigation, the accounting team may fail to properly record or disclose a loss contingency — resulting in audit findings or misstatements. Clear, documented communication channels between departments are critical for complete and accurate financial reporting.

10. Lack of Readiness for New Accounting Standards

Companies often underestimate the effort required to adopt new standards — such as those related to segment disclosures (ASU 2023-07), income tax disclosures (ASU 2023-09), and business combinations (ASU 2023-05). Late-stage implementation leads to rushed adjustments and audit stress.

Fortunately, many of these issues are avoidable through proper preparation, communication, documentation, and adherence to regulations.

How to Prepare for a Smoother Audit Season

Here are a few best practices to reduce audit risks and improve efficiency in the financial statement reporting process:

• Start early: Preparing for the year-end audit should begin months in advance. Develop and assign internal timelines for PBC deliverables, reconciliations, and close procedures.

• Assess and document internal controls: Clearly document your control procedures. Perform regular controls testing throughout the year and update them to reflect changes in processes or personnel at year-end.

• Invest in training: Your accounting and finance teams should stay current on new standards and audit requirements to reduce the risk of misapplication.

• Leverage technology thoughtfully: Use financial close and compliance tools to streamline workflows, manage documentation, and maintain audit trails.

• Conduct a pre-audit walkthrough: Reviewing key areas of risk, estimates, and controls ahead of time enables your company to address issues before auditors arrive.

• Foster collaboration: Create open channels of communication between auditors, internal accounting functions, IT, operational departments, and the audit committee to minimize misalignment. Collaboration between external auditors and the internal audit team can also be beneficial. However, under the Public Company Accounting Oversight Board’s new QC 1000 standards, internal auditors are considered “other participants” in the audit, which may affect how their work is evaluated and used. Companies should understand the implications of this designation and ensure internal audit activities are properly documented and aligned with audit objectives.

Be Proactive to Prevent Audit Mistakes Before They Happen

A successful audit is more than a compliance milestone. It’s a sign of sound corporate governance. By recognizing common mistakes and addressing them proactively, you can support more accurate and timely financial statements, reduce audit fatigue in your team, and build trust with stakeholders and regulators.

How MGO Can Help

Our Audit and Assurance team supports public companies through every stage of the audit lifecycle — from preparing internal controls documentation to navigating complex accounting standards and responding to auditor inquiries. Our professionals bring deep industry experience to help clients identify risks and streamline financial reporting processes. If you’re approaching audit season or facing challenges with audit readiness, reach out for guidance tailored to your specific needs.

The post 10 Common Public Audit Mistakes That Could Delay Your Timeline appeared first on MGO CPA | Tax, Audit, and Consulting Services.

Bill: Let’s start with the fun stuff first: by day, you’re an audit partner but your not-so-secret passion is your band.  Tell me about your gig earlier this week.  

Simon: We were playing at the Harp, a bar in Newport Beach. An Irish bar and pub.  

Bill: So, what kind of stuff do you all play? 

Simon: A little bit of everything — rock, classic rock, country, punk, pop, even hip hop. Yeah, we do a Nelly song. We ended up playing until 12:30 AM that night — which is late for us old folks. 

Bill: Impressive. Now, shifting gears — you work with several manufacturing clients. What are they telling you about how tariffs are now, or could potentially, impact their business? 

Simon: Honestly, it’s one of the biggest disruptors they’re facing. Tariffs throw a wrench in long-term planning. A lot of clients had diversified out of China, moving production to countries like Vietnam, Cambodia, or Bangladesh… only to get hit with new tariffs there, too. It makes supply chain strategy feel like a moving target. One of my apparel y clients was doing great shifting manufacturing across countries. But now their strategy’s wiped. They might not make it through the year.  

Bill: That’s brutal. So, you’re telling me it’s not just a China issue anymore? 

Simon: Exactly. Tariffs have become a much broader, more unpredictable challenge. One apparel client had a solid multi-country sourcing strategy, but when U.S. tariffs expanded beyond China, their margins collapsed. They went from thriving to barely surviving, just like that. 

Bill: That’s rough. How do you advise clients to respond 

Simon: There’s no silver bullet, but flexibility, nimbleness, is key. We’re encouraging clients to build sourcing redundancy. Think “China-plus-one” or “China-plus-two.” It’s also about monitoring policy shifts closely, so they’re not blindsided. We help them plan for every scenario and understand where their risks are concentrated. But as with most things, uncertainty is the biggest challenge. Companies don’t know when or where tariffs will hit, so planning can become almost impossible.  

Bill: Are there clients that are weathering this well? 

Simon: The ones who’ve invested in agility — like tech-enabled supply chains, diverse vendors, adaptable logistics — they’re more resilient. But even they’re feeling the pressure. Tariffs are just one part of a much larger uncertainty picture, and you’ve got to stay sharp. 

In today’s volatile global trade environment, manufacturers need more than a Plan B. Let’s talk about how MGO can help you stay agile, mitigate risk, and drive growth. 

The post MGO Stories: From Rock Covers to Real Talk on Tariffs, Audits, and M&A appeared first on MGO CPA | Tax, Audit, and Consulting Services.

Bill: You once told me that persistence and resilience are themes for you. How have these themes carried over into your professional life, in the work that you do with your clients? 

Cesar: I’ve always believed that if you’re resilient and persistent, you achieve better fruits in the future. That applies directly to our professional role. Audit engagements, especially with public company clients, can be very difficult to get comfortable with from another perspective. But if we stay persistent, we can deliver results, meet deadlines, and get to the finish line. 

Bill: Let’s talk about how that relates to cannabis. When resilient companies in that space try to raise capital, what are some of the challenges you see? 

Cesar: Investors are cautious. When cannabis companies issue debt, investors often want more than just a high interest rate — they want warrants on top of that. But warrants come with complications. If holders have anti-dilution rights, then when the company raises more capital, those warrants can’t be diluted. That creates liabilities. We understand the derivative activity that results from these structures and how to address them from an accounting standpoint.  

Bill: Beyond financing, many cannabis companies are also growing quickly through acquisitions. They obviously have to be persistent, but what issues come up there?  

Cesar: Smaller operators often start with one or two dispensaries or a single greenhouse and then expand rapidly to 20 or more locations. That triggers business acquisitions. The question is…how do you account for those transactions? Do you observe inventory on day one? Some firms skip that, and it becomes a finding. We focus on doing things right every step of the way. 

Bill: You’ve also worked on some very complex biotech audits, including situations where larger firms struggled. Can you share one of those experiences? 

Cesar: Sure. We were referred to a situation with a larger biotech company that had been audited by a Big Four firm. The Big Four couldn’t trust management on certain foreign transactions. Every question went up to their national office, and it dragged on for weeks. Quarterly reviews stalled, the prior year audit wasn’t completed, and the current year audit was at risk. 

We came in and approached things differently. Instead of sending information up the chain, we sat down with management — CEO, CFO —and made phone calls in front of them, validated the information directly, and often resolved issues the same day. We pulled in legal, transactions, and accounting teams, connected the dots, and identified where the real issue was. 

Over three to four months, thousands of hours, we caught up on quarterly reviews, delivered the prior year audit, and positioned the company for the current year audit. We presented our findings to the audit committee, including material weaknesses and deficiencies, but we got to the finish line. And we did it without shying away from tough conversations. All while still keeping the audit on track. 

Bill: That’s exactly what stands out, Cesar. Whether it’s cannabis companies navigating capital raises and acquisitions, or biotech firms dealing with high-stakes audits, you and your team get results. 

In cannabis and biotech alike, persistence, technical depth, and a hands-on approach make the difference between stalled progress and a successful outcome. At MGO, we combine resilience with practical execution to help clients navigate complexity and move forward with confidence. Contact us to learn more.  

The post MGO Stories: From Cannabis Capital to Complex Biotech Audits appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• An M&A-focused audit begins with a tailored planning process that identifies the areas most relevant to the merger or acquisition.

• Evaluating internal controls helps identify operational and financial risks that could impact negotiations or valuations.

• Insights from the audit can improve financial practices and support a smoother transition after the transaction.

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When you’re preparing for a merger or acquisition (M&A), every number matters. Potential buyers, investors, and lenders need clarity on your financial statements and the integrity of your entire operation. That’s where an audit plays a crucial role.

A well-executed audit provides a clear, independent view of your financial health. It helps identify potential risks, discrepancies, or issues long before they come to the buyer’s attention and affect valuation, negotiations, or even closing the transaction.

Inside a Well-Executed M&A Audit: 6 Key Steps

Here’s a behind-the-scenes look at an M&A audit. We’ve broken the process down into six essential steps that can help head off surprises and keep your deal on track.

Step 1: Initial Planning and Scoping to Understand Your Business

Before any testing begins, there is a planning phase designed to understand your company’s operations, industry, and the purpose of the audit. In the context of a merger or acquisition, that means focusing on what matters most to the transaction. Typically, this includes revenue, profit, assets, customer contracts, vendor agreements, debt, and contingent liabilities.

During this stage, your auditor will also request a list of documents — such as prior-year financials, trial balances, accounting policies, accounts receivable aging reports, customer lists, depreciation schedules, customer contracts, leases, and loan agreements. They will also request documentation on internal control policies and procedures.

This scoping exercise helps define higher-risk areas, set materiality thresholds, and tailor the audit plan.

Step 2: Risk Assessment and Internal Control Evaluation

During the planning phase, auditors also assess how you design and implement internal controls. This step is a part of any financial statement audit, but it’s especially relevant to M&A audits because weak, inconsistent, or non-existent internal controls can signal broader financial or operational risks that could impact valuation or even derail the deal.

The audit team performs walkthroughs of key processes to understand how you recognize revenue, manage inventory, handle cash, and issue payroll and other disbursements.

If control weaknesses are identified, they are flagged so you can proactively address the issue or prepare to explain mitigating factors to the buyer before they become sticking points in negotiations.

Step 3: Detailed Substantive Testing

Substantive testing is a big part of a financial statement audit. During fieldwork, auditors thoroughly perform testing on financial data to confirm its completeness and accuracy. They’ll test balances and transactions using a combination of sampling, confirmations, analytical procedures, and inspection.

In the context of an M&A deal, substantive testing might include validating:

• Accounts receivable and major customer balances

• Inventory levels and valuation methods

• Fixed asset registers and depreciation schedules

• Outstanding debts, lease obligations, and legal liabilities

• Revenue streams and contract terms

• Adjustments and accruals

Every figure tested helps you (and potential acquirers) gain a clearer picture of your financial position and operational performance. Testing can also align with the acquiring entity’s due diligence needs.

Step 4: Identifying and Communicating Key Findings

As testing progresses, auditors document discrepancies and areas of uncertainty. Rather than waiting until the final report, auditors may share interim findings throughout the audit process and discuss the implications with you.

If issues arise — such as revenue booked before it’s earned, misclassified liabilities, or unrecorded contingent exposures — you have an opportunity to investigate, correct, or clarify questions before the deal proceeds. Early visibility into these findings allows you to improve processes and prepare responses to questions that might arise during the due diligence process.

Step 5: Final Review and Delivering the Audit Report

Once fieldwork is complete, the audit moves into the final review phase. Auditors evaluate the completeness of documentation, tie up any loose ends, and ensure audit workpapers support conclusions before issuing the audit report.

The timing of this report may align with due diligence milestones or closing deadlines for a merger or acquisition. An unqualified opinion, also known as a “clean report”, lends credibility to your financial statements and supports buyer confidence.

If the audit uncovers concerns, your management letter becomes a valuable roadmap for remediation and negotiation.

Step 6: Post-Audit Insights and Transaction Support 

A thorough M&A audit often gives insight beyond the numbers in your balance sheet, income statement, and statement of cash flows.

For example, it may uncover opportunities to strengthen documentation, update internal controls, streamline reconciliations, or improve accounting policies. All of these can prepare you for a liquidity event and serve the organization well post-transaction.

Many companies use the audit findings to prepare for future reporting requirements under a new ownership structure, particularly when transitioning to public-company standards or integrating into a larger corporate environment.

How MGO Can Help

Preparing for a merger or acquisition is a high-stakes, high-visibility moment, and a well-executed audit helps you tell a compelling story about your business.

Working through planning, assessing risk, testing data, communicating findings, delivering the final report, and drawing out insights gives you a better understanding of your position, reduces uncertainty for all parties, and helps you move forward in the transaction with greater confidence.

If you’re considering a merger or acquisition, reach out to MGO’s transaction advisory team early. Preparation is everything, and the cleaner your books, the smoother the road ahead.

The post Preparing for a Merger or Acquisition? Here’s How a CPA Firm Handles the Audit Process appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Clear, consistent classification of direct and indirect costs is critical for maximizing grant utilization and making sure you’re compliant.
• Choosing the right indirect cost recovery strategy (NICRA or de minimis) directly impacts a grant recipient’s ability to recover operational expenses.
• Misclassification or inconsistent treatment of costs can jeopardize your financial reporting accuracy and the long-term health of grant-funded programs.

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Bottom Line Up Front

Grant recipients navigate multiple complexities when managing federal financial assistance, including defining costs as indirect or direct and selecting the most appropriate indirect cost recovery strategy to maximize utilization of grant funds and cost recovery. Further, a lack of clarity and understanding of the associated cost accounting practices and consistency of treatment of certain costs as direct or indirect can cause serious compliance challenges for grant recipients. 

In an environment where acceptable indirect cost rates is a topic of discussion and scrutiny from several federal grant-making agencies, it is critical for grant recipients to understand their current indirect cost methodologies and be prepared to revisit or adjust their strategies going forward to protect or enhance financial health.

What Are Direct and Indirect Costs?

Direct costs are costs grant recipients can attribute specifically to program operations, which are reimbursed at the full level of the cost allocated to the grant. Indirect costs refer to costs a grant recipient cannot easily assign directly to a particular cost objective that help manage the administrative functions of their operations (e.g., overhead costs). Indirect costs are charged to an award as a percentage of the direct costs, allowing grant recipients to recover the costs of these operational activities that cannot be directly attributed.

Since grant recipients incur both direct and indirect expenses, they must consider their cost methodologies in a way to fairly represent their operational expenses so they can accurately charge program expenses against grant funds. Reporting an ineffective or inaccurate indirect cost allocation methodology or making poor strategic decisions for direct and indirect cost treatment can risk the underutilization of grant funds that may jeopardize the financial health of the grant-funded program.

Some grant recipients find it challenging to appropriately identify expenses as direct or indirect as certain types of costs may fall into either category or overlap depending on the organization’s structure and/or cost accounting practices. Therefore, its critical for grant recipients to establish clear and consistent methodologies for how such costs are treated.

Examples of Direct and Indirect Costs

Note: If a grant recipient is choosing to identify cost types detailed above as a direct cost to a specific program or activity, it must also similarly attribute such expenses as direct costs to all other specific programs or activities it operates, regardless of funding source, and can only consider remaining items that truly support all operations in their indirect pool.

Applying Costs Against Awarded Grant Funds

Effective allocation of costs is critical to ensure expenses are appropriately charged to each program or activity and that the grant recipient can accurately track and report the charges to a grant program on its financial reporting. This includes the detail of costs included on a grant recipient’s invoices or reimbursement requests and its Federal Financial Reports (SF-425), a reconciliation the grant recipient is required to submit periodically that illustrates the financial health of the grant-funded program or activity.

There are different methodologies to calculate the amount of indirect costs charged to the grant. Grant recipients may elect to establish a Negotiated Indirect Cost Rate Agreement (NICRA), which is calculated based on the specific indirect costs incurred by each organization and reviewed and negotiated with the organization’s cognizant or oversight agency (the agency that represents the largest proportion of funds received by the organization). Establishing a NICRA allows a grant recipient to reflect the full cost to run its business and elect the most effective or appropriate distribution basis against which its indirect rate will be applied. Once in place, a NICRA must be accepted by any federal funding agency.

Recipients who choose not to (or may not be eligible to) pursue a NICRA can use the de minimis rate established in 2 CFR 200.414(f). This allows organizations without a current NICRA to use an indirect cost rate up to 15% (increased from 10% as of Oct. 1, 2024) of Modified Total Direct Costs (MTDC) charged to the grant. MTDC are direct costs, excluding equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $50,000 (increased from $25,000 as of Oct. 1, 2024).

Examples of Direct and Indirect Costs

How MGO Can Help

Navigating federal grant compliance requirements can be complex, but you don’t have to do it alone. MGO’s State and Local Government team works closely with grant recipients to review cost allocation methodologies, assist with indirect cost rate development, and identify opportunities for better financial management and recovery. Whether you’re unsure how to classify certain costs or you need guidance on improving your reporting accuracy, our team can help you develop practical, defensible strategies that stand up to audit scrutiny and safeguard your funding. Contact us to learn more.

Written by David Clark and Dan Grossman. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com

The post Cost Category Considerations for Grant Recipients appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• If your business qualifies, you can access NMTC-subsidized loans that offer favorable terms and potential loan forgiveness after seven years. 

• Sectors such as healthcare, manufacturing, education, and renewable energy may qualify, while certain restricted businesses are excluded. 

• To be a successful job applicant, you should demonstrate job creation, training programs, or improved access to services like healthcare or education. 

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The New Markets Tax Credits (NMTC) Program is a federal initiative aimed at supporting businesses that make capital expenditure (CapEx) investments and create community impact in low-income areas in the U.S. Through the NMTC program, companies making these investments can receive tax credit-subsidized loans for use in their projects. Among other preferential terms, these NMTC loans generally provide for forgiveness of the principal at the end of a seven-year term, delivering a permanent cash benefit to investors. 

These FAQs provide insights and answers about the program, offering an overview of its features and explaining how businesses can benefit from participation. 

What is the NMTC program? 

• The NMTC program was created in 2000 as part of the Community Renewal Tax Relief Act and was designed to subsidize capital investments in low-income communities. Businesses that invest in eligible low-income communities (Qualified Active Low-Income Community Businesses or QALICBs) are eligible to receive tax credit-subsidized NMTC loans that have principal forgiveness features after a seven-year term, providing a permanent cash benefit to the QALICB. In addition to principal forgiveness, these loans offer other beneficial features, including interest-only terms and below-market interest rates. 

Who can benefit from the NMTC program? 

• Businesses that make CapEx investments in eligible low-income census tracts are eligible to apply and receive NMTC financing. Businesses can be either for-profit or not-for profit.  

• Additionally, the NMTC program supports a wide range of business sectors, including manufacturing, healthcare, retail, renewable energy, education, and more. Businesses involved in the following activities are not eligible for NMTC financing: massage parlors, gaming facilities, liquor stores, racetracks, tanning facilities, and golf courses. The NMTC program also imposes certain restrictions related to farming and residential rental properties. 

How does the NMTC program work? 

• Every year, certified Community Development Entities (CDEs) apply to the Community Development Financial Institutions (CDFI) Fund, a branch of the U.S. Treasury, for New Markets Tax Credit Authority (also known as an NMTC allocation). If awarded an NMTC allocation, CDEs use this tax credit authority to offer tax credits to Tax Credit Investors in exchange for NMTC equity. CDEs can then use the capital to make loans and investments to QALICBs with projects in low-income communities. Each CDE has its own specific strategy for its NMTC allocation (for example, some CDEs may provide NMTC financing only to businesses in certain states or certain industries) and will evaluate which projects to finance based on the community impact generated by the CapEx investment. 

• The NMTC program is currently set to expire on December 31, 2025, with the final two rounds (CY24 and CY25) of approved NMTC allocation expected to be released in the fall of 2025, totaling $10 billion. The NMTC program has generally received bipartisan support and, most recently, the Senate Finance Committee released legislative text as part of the Senate Republicans’ proposed budget reconciliation bill on June 16, 2025 that included a provision to permanently extend the NMTC program.  

NMTC Project Requirements 

Is my project eligible for NMTC financing? 

• To be eligible for NMTC financing, projects must be located in an eligible low-income census tract and must generate significant community impact. Community impact encompasses a wide range of initiatives, including but not limited to: 

• Quality job creation, generating positions that offer living wages and/or benefits such as health insurance, 401K or retirement plans, and paid time off. 

• Accessible job creation, whereby positions are made available to individuals who have only a high school degree or the equivalent, or individuals who face other barriers to employment (for example, the longer-term unemployed, displaced workers, or the formerly incarcerated). 

• Creating or expanding employee training programs or providing opportunities for career advancement. 

• Increasing access to goods or services such as healthy foods, healthcare and childcare services, education programs, and more. 

• Minority outreach efforts such as targeted hiring of minority individuals or engaging minority-owned or controlled contractors/subcontractors during construction. 

• Environmental efforts such as supporting the production or distribution of renewable energy resources; reducing energy or water use; helping builders meet Leadership in Energy & Environmental Design (LEED) certification or similar green building standards; remediating environmental contamination. 

What types of expenses are eligible for NMTC financing? 

• NMTC loans can be used towards CapEx such as costs related to new construction, building rehabilitation, or expansions, and equipment purchases. In some cases, NMTC loans can also be used to provide small amounts of working capital (usually in combination with the aforementioned CapEx). 

• NMTC loans can be used for project costs that will be incurred within 12 months of the NMTC closing date or for prior project costs that were incurred within 24 months of the NMTC closing date. 

Is there a minimum or maximum CapEx amount for eligible projects? 

• There are no restrictions on the project size to qualify for NMTC financing. 

• For smaller projects, QALICBs should consider transaction costs and other factors when determining whether NMTC financing is beneficial for the project. 

• While there is no minimum or maximum project size, CDEs generally prioritize projects that generate community impacts that are meaningful in comparison to the project size.  

Securing NMTC Allocation 

How can QALICBs apply for NMTC financing? 

• CDEs typically require QALICBs to complete an application or intake form that provides information about the project, including a project description, its timing, anticipated community impact, and information on other financing sources and the project budget. CDEs may also request typical financial reporting documents, such as prior year audited financials and the project’s financial projections, as part of the application process. 

• The CDE will then evaluate the QALICB’s application and, if approved, will offer a term sheet for an NMTC allocation. 

When should a company apply for an NMTC allocation? 

• QALICBs can apply for an NMTC allocation anytime throughout the year; however, CDEs typically seek to deploy their allocation quickly once they receive it. NMTC allocations are awarded to CDEs once annually. CDE applications for the 2024-2025 NMTC allocation round were due on January 29, 2025, and the awards are expected to be announced in late 2025.  

• The NMTC funds must be fully spent within 12 months of the NMTC closing date (i.e., the date the NMTC loans are issued to a QALICB), so CDEs typically look for projects that are ready to start construction. However, projects that are already underway are also eligible to receive NMTC financing. 

What is the typical timeline to receive NMTC financing? 

• The timeline to receive NMTC financing varies for each transaction. Once a term sheet from a CDE has been received, the typical closing timeline is approximately 8 to 10 weeks, during which time the transaction documents are drafted and negotiated. 

What are the compliance requirements for NMTC financing? 

• Once a project has received NMTC financing, the project must stay within the designated low-income census tract for seven years, in addition to meeting other NMTC requirements. 

• QALICBs will also have reporting obligations to the CDEs and Tax Credit Investor. The reporting requirements vary slightly for each transaction, but typically include community impact reporting and other customary financial reporting (such as financial statements and tax returns). 

Maximize Your NMTC Opportunity with MGO’s Tax Advisory Team 

Navigating the New Markets Tax Credit program requires strategic financial planning, detailed community impact documentation, and deep knowledge of regulatory timelines. MGO’s experienced tax professionals help businesses identify qualifying projects, prepare competitive NMTC applications, and manage compliance obligations across the seven-year term. Whether you’re building a healthcare facility, expanding a manufacturing plant, or launching a new education or renewable energy project, MGO offers the tax, audit, and consulting support you need to unlock permanent cash benefits and fulfill your mission-driven goals. Contact us to learn more.  

The post New Markets Tax Credit FAQs for Businesses  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Changing government auditors is a strategic move that impacts transparency, compliance, and public trust.

• To make a smooth transition, focus on legal requirements, institutional knowledge, and communication style.

• Choosing an audit firm with deep public sector experience can deliver long-term value beyond just the lowest bid.

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For state and local governments, changing auditors isn’t just a matter of compliance — it’s about trust, transparency, and public accountability. Whether you’re making a required rotation or looking for a fresh perspective, choosing a new audit firm involves more than a cost comparison. It’s an opportunity to reassess how your audit function supports your mission, enhances internal controls, and maintains the public’s confidence.

If you’re preparing to transition audit firms, here are five essential moves to keep your agency on track:

1. Align the Switch With State Requirements and Oversight Bodies

Unlike private companies, you operate in a regulatory environment that blends state laws, federal grant requirements, and oversight from entities like the Government Accountability Office (GAO) or single audit requirements under Uniform Guidance. Before you change auditors, take time to map out the legal and procedural requirements specific to your jurisdiction.

Some questions to ask yourself:

• Is auditor rotation required by statute or policy?

• Do procurement rules mandate an RFP process?

• Are there any reporting deadlines tied to federal funding that might impact your timing?

Failing to align with these standards can delay your financial statements or risk your standing with grantors. Check with your finance team and legal counsel to confirm compliance before moving forward.

2. Look for Government-Specific Experience

Auditing a city, county, school district, or special district isn’t the same as auditing a corporation. You need an audit team that understands fund accounting, GASB standards, budgetary compliance, and the unique challenges of public sector operations — like pension obligations, enterprise funds, or capital project reporting.

Ask potential firms:

• Do you have experience with similar-sized government entities?

• How familiar are you with GASB updates that affect our reporting?

• Can you provide guidance on complying with the Uniform Guidance if we receive federal funds?

This isn’t about general financial knowledge — it’s about understanding how to apply that knowledge in the context of the public good.

3. Create a Transition Plan That Protects Institutional Knowledge

A smooth transition isn’t automatic. If your previous auditors have been with you for years, they’ve likely developed deep institutional knowledge that won’t appear in a handoff memo. Losing that knowledge can affect the audit timeline and your team’s efficiency.

Start planning early:

• Assign a staff lead to coordinate the transition.

• Facilitate the successor auditors’ inquiries of the predecessor auditors by providing contact information early.

• Document major accounting treatments, past audit findings, and any open recommendations.

The more clarity you provide up front, the faster the new firm can ramp up — and the less disruption your internal team will face during the change.

4. Evaluate Communication Style and Accessibility

You know that a government audit doesn’t just result in a report — it may be discussed at public meetings, reviewed by oversight boards, or used by external stakeholders to assess performance. That makes the auditor’s communication style a critical factor.

When meeting with candidates, look for:

• Responsiveness: Will they answer questions promptly during audit season?

• Clarity: Can they explain complex issues in plain language to council members or board trustees?

• Proactiveness: Will they flag potential issues early instead of waiting until the final report?

A firm that keeps you informed and is available throughout the process can help you avoid surprises — and prepare you for responding to public scrutiny if tough questions arise.

5. Balance Cost With Public Value

Budgets are tight, and it’s tempting to go with the lowest bid. But remember — the audit is a public trust tool, not just a procurement line item. A low-cost provider who lacks specific government knowledge or experience may cost more in the long run if the audit takes longer or puts federal funding at risk.

Instead of focusing only on fees, ask:

• What’s included in the base fee? Are there charges for follow-up work or extra support?

• How many hours will be dedicated to planning and fieldwork?

• What’s your track record for completing audits on time?

Value means more than price — it’s about what you’re getting in return, and how the audit supports your long-term goals for transparency, accountability, and operational excellence.

Make the Move With Confidence

Switching auditors is more than a change in paperwork — it’s a strategic move that reflects your values and commitment to sound governance. When done thoughtfully, the transition can bring fresh insights, stronger internal controls, and more effective use of public resources.

Take the time to choose an audit team that understands the public sector, recognizes your operational complexities, and communicates clearly with your leadership. Because at the end of the day, this isn’t just about compliance — it’s about credibility.

How MGO Can Help

We help governments like yours navigate auditor transitions with clarity and confidence. With one of the largest and most experienced State and Local Government practices in the nation, we bring deep knowledge of GASB standards, single audit requirements, and performance expectations to support your goals for transparency, accountability, and operational excellence.

Reach out to our team today to find out how we can meet your audit needs.

The post Is Your Government Changing Auditors? Don’t Skip These 5 Steps appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• As a board director, you should align your internal audit with board goals by clarifying purpose, mandate, and adherence to IIA Global Standards for stronger governance and oversight. 

• Risk-based internal audit planning is key to helping boards address strategy, emerging threats, and resource gaps in a dynamic business environment. 

• Strong board oversight improves internal audit performance, enhances resource readiness, and supports the use of AI and data analytics. 

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In today’s rapidly evolving business landscape, the internal audit (IA) function’s role has become more valuable in helping organizations create and sustain long-term shareholder value. IA provides objective assurance, advice, insight, and foresight leveraging a risk-based approach. Board oversight and support of the internal audit function is essential to its effectiveness. Listing standards and more recently, the update Global Internal Audit Standards™ issued by The Institute of Internal Auditors (IIA) provide a principles-based framework for the board to oversee the IA function and its performance.   

Below are some essential questions that boards of directors should consider in their oversight of the IA function: 

Are the board and internal audit aligned on purpose, mandate, expectations, roles, and responsibilities?  

• Has the IA charter been authorized by the board, and is it aligned with the new global standards?  

• What is the IA mandate, and was it created, updated, and authorized in collaboration with stakeholders such as external auditors, management, and the board? 

• Are roles, responsibilities, and expectations for IA, board, and management clearly defined in a charter including the scope and types of IA services to be provided? 

• What is the process and frequency of updating the IA charter and/or mandate due to circumstances such as organizational changes, new laws and regulations, acquisitions, significant changes to strategy or risk profile, etc.?  

• Is IA organizationally independent and free from management influence (e.g., reporting directly to the board, positioned at an appropriate level of the organization, etc.)? 

Are the board, internal audit, and management aligned on strategy and risk priorities? 

• How does the IA function determine that its annual plan and performance objectives align with the overall strategy, risks, and objectives of the organization? Were efforts made to collaborate with the board, management, external auditors, and others, as appropriate? 

• Does the CAE demonstrate a clear understanding and maturity of the organization’s governance, risk management, and control processes?  

• Has IA’s risk assessment process identified and assessed both the likelihood and potential impact of various risks to the organization? 

• How does the IA function identify and evaluate internal controls for adequacy in reducing risk?  

• How do the CAE and IA function consider risks of fraud in its risk assessment and audit plan? 

• What risks are not included in the IA plan and why?  

• What risk areas would be added to the plan if additional resources were available? 

• What is the process and cadence for updating the internal audit plan for newly identified areas of risk?  

• Does IA communicate timely with both management and the board about noted governance, risk, control, and/or compliance deficiencies resulting from its testing of processes, procedures, and controls? What is management’s remediation plan to address deficiencies and improvement opportunities identified by IA? Who is included in remediation efforts and how are their efforts monitored to resolve findings promptly? 

How is quality assurance and performance being monitored and evaluated? 

• What monitoring and evaluation techniques are being used by the board to help ensure  IA is fulfilling its mandate and performance objectives including conforming to standards, laws, and regulations? 

• Does IA conduct annual assessments of its own quality and effectiveness through both ongoing internal monitoring and periodic self-assessments? 

• Has the CAE established a Quality Assurance and Improvement Program (QAIP) to evaluate and work to ensure   IA conforms to the IIA Global Internal Audit Standards™, meets performance goals, and strives for continuous improvement? What are the results of the most recent internal quality assessment? Who performed the assessment? How is the board overseeing an action plan to address instances of nonconformance with standards or opportunities for improvement? 

• When was the last external quality assessment performed? Was it performed by a qualified independent assessor or team? 

• What is IA’s remediation plan to address identified deficiencies and opportunities for improvement, and how is the board tracking progress against that plan? 

Does the IA team have the necessary resources and expertise to fulfill its current responsibilities and evolving needs? 

• Has the board approved the CAE’s roles and responsibilities and identified necessary qualifications, experience, and competencies to conduct the identified roles and responsibilities in alignment with the requirements included in the IIA Global Internal Audit Standards™?  

• Has the board evaluated the CAE’s performance and approved the CAE’s compensation? 

• When were IA job descriptions last reviewed, and do they align with the evolving team’s expectations in terms of responsibilities, requirements, skills, and experiences? 

• What additional professionals, skills, experiences, and capabilities does the CAE need to fulfill the IA mandate and plan? Does IA have the ability to attract and retain qualified professionals? 

• Does IA have the necessary technology and technical skillsets to keep up with the rapid changes in the business and industry? 

• How does IA utilize advanced tools and technologies (e.g., automation, data analytics, AI) to enhance its efficiency and effectiveness while mitigating risks associated with adoption of new technologies? 

• What continuing education, training, and upskilling opportunities are being provided to the IA staff? 

• Does the CAE and IA staff reference the International Professional Practices Framework (IPPF) in conducting their audit work?  

• How does the CAE oversee and evaluate IA staff to determine adherence to the IIA’s Global Internal Audit Standards™ and Code of Ethics and alignment with IA plan and mandate? 

• Does the board support adequate funding of the IA function for the successful implementation of the audit strategy and achievement of audit plan objectives? 

• Does the board support IA’s adoption and use of technology to enhance efficiency and effectiveness of processes and procedures (e.g., tools for automation, data analytics, and use of AI, etc.)? Does the board, management and IA understand the risks of utilizing these tools and have safeguards in place to mitigate these risks? 

• Does IA have the necessary technology and technical skillsets to keep up with the rapid changes in the business and industry? 

• How does IA utilize advanced tools and technologies (e.g., automation, data analytics, AI) to enhance its efficiency and effectiveness while mitigating risks associated with adoption of new technologies? 

What is being done to ensure the board and senior management support and collaborate with IA? 

• What is being done to cultivate an inclusive and supportive culture within the IA team, and in interactions with the board and management? 

• What actions has the board taken to champion the IA function and its value? 

• What are the criteria and processes for determining which issues should be escalated to the board for discussion? 

• Does the board have a regular cadence of meetings with the CAE and/or IA, and on occasion are these meetings without management present? 

• Were there any disagreements with management or instances where IA access to information was restricted?   

Board oversight of the internal audit quality structure and function helps protect the integrity of operations and related financial reporting.  

Written by Amy Rojik, Rachel Moran and Lee Sentnor. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com 

Modern Governance Requires Modern Internal Audit Support, and MGO Can Help  

At MGO, we help middle-market organizations and their boards embrace proactive oversight through robust internal audit programs. Our professionals bring deep experience across regulated industries — like healthcare, life sciences, technology, and entertainment — to make sure your internal audit function is not only compliant but strategic. From outsourced and co-sourced internal audit services to audit readiness, risk advisory, and performance enhancement, we empower boards and executives to confidently navigate risk, optimize governance, and drive long-term value. Contact us to learn more.  

The post Internal Audit: Essential Questions for Board Directors in their Oversight Role  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Fidelity bonds are not interchangeable with fiduciary or D&O insurance. Each policy type serves a distinct risk category and compliance role. 

• Coverage is required regardless of plan size or audit exemption. Even small plans or those not subject to audit may be noncompliant without proper bonding. 

• Cybersecurity coverage is not automatically included. ERISA bonds must be reviewed to confirm whether cyber-related risks are addressed. 

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Fidelity bonds are known as the fundamental component of safeguarding your employee retirement plans. Required by the Employee Retirement Income Security Act (ERISA), these bonds protect plan assets from any losses due to misappropriation or misuse by the individuals who handle plan funds. Yet, despite the importance of this safeguard, there still exists widespread confusion among plan sponsors and their administrators.  

Read on for further clarification on the key compliance requirements — by correcting five frequently encountered myths about these ERISA fidelity bonds, you can better align with the regulatory expectations and reinforce internal controls.  

Understanding ERISA Fidelity Bond Requirements 

Mandatory Coverage 
ERISA generally mandates that most retirement plans maintain fidelity bond coverage equal to at least 10% of plan assets, with minimum and maximum thresholds. Exceptions apply to certain unfunded, governmental, or church plans. Form 5500, filed annually under penalty of perjury, asks directly about this coverage — so accurate compliance is essential. 

Bond Sourcing and Structure 
The bond must be obtained from an insurer listed on the Department of the Treasury’s approved surety list. It can be issued as a standalone bond or included within a broader insurance policy, but it has to meet ERISA’s first-dollar coverage rule, which prohibits deductibles. 

Covered Individuals 
Anyone with access to plan funds — including fiduciaries and relevant third-party administrators — must be included in the bond’s scope. The coverage has to apply to all plan assets, regardless of asset type or custody arrangements. 

Five Myths That Can Risk Your Compliance 

1. “Our fiduciary insurance covers the ERISA bond requirement.” 
You’ve probably heard this common misunderstanding. That’s because fiduciary liability insurance covers breaches of fiduciary duty, while fidelity bonds cover acts such as theft or embezzlement by those handling funds. Both are important, but not interchangeable. 

2. “Retroactive fidelity bond coverage can fix past gaps.” 
Insurers generally can’t issue retroactive bonds due to legal constraints. Sponsors discovered without coverage during a plan audit must work with the Department of Labor (DOL) to document their remediation efforts and make sure they’re compliant. 

3. “We’re exempt because our plan doesn’t require an audit.” 
The thing is, audit exemptions don’t apply to fidelity bonds. ERISA requires fidelity coverage regardless of the number of plan participants or the size of the plan assets. 

4. “Our D&O insurance includes fidelity coverage.” 
D&O insurance may reference fidelity coverage, but this doesn’t guarantee your compliance with ERISA bonding requirements. For example, many policies include deductibles, which disqualify them under ERISA. You should review each policy carefully. 

5. “The bond protects against cyber theft by default.” 
Some fidelity bonds include provisions related to cybersecurity...but not all do. The DOL encourages plan sponsors to be proactive and assess and supplement your cyber protections. Combination policies can be explored but must still meet ERISA requirements. 

Supporting Plan Integrity Through Review 

Protecting retirement plan assets is both a regulatory obligation and a fiduciary priority. MGO’s Employee Benefit Plan Audit professionals can assist with evaluating your current fidelity bond coverage, identifying potential gaps, and supporting alignment with DOL and ERISA guidelines. Our team brings a detail-oriented, audit-first perspective to strengthen the security and compliance posture of your plan. Contact us to learn more.  

The post ERISA Fidelity Bonds: Dispelling Five Common Misunderstandings  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• A new White House-led HBCU initiative shifts focus from DEI to innovation, fiscal health, and workforce development. 

• Federal engagement now emphasizes private-sector partnerships and infrastructure support across key industries. 

• HBCU leaders must align institutional goals with new federal priorities to stay eligible for funding and program opportunities. 

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On April 23, President Donald J. Trump issued an executive order titled, White House Initiative to Promote Excellence and Innovation at Historically Black Colleges and Universities, that significantly reshapes federal engagement with historically Black colleges and universities (HBCUs). This order revokes a Biden-era initiative and reinstates a White House-led framework, emphasizing excellence, innovation, and long-term viability, while notably omitting references to diversity, equity, and inclusion (DEI). As leaders of institutions of higher education, understanding the nuances of this order is crucial for strategic planning and alignment with federal priorities. 

Key Features of the Executive Order 

The executive order establishes a new White House Initiative on HBCUs within the Executive Office of the President. This initiative is designed to enhance HBCUs’ capacity to deliver high-quality education and to foster private-sector partnerships, institutional development, and workforce preparation in high-growth industries such as technology, healthcare, manufacturing, and finance. 

• White House-Led Initiative: The initiative will prioritize cross-sector coordination to support campus operations, student development, and workforce readiness. It aims to address barriers to HBCUs receiving federal and state grant dollars and to improve their competitiveness for research and development funding. 

• Establishes the President’s Board of Advisors on HBCUs: The order establishes a board within the U.S. Department of Education (ED), comprised of leaders from philanthropy, education, business, finance, entrepreneurship, innovation, private foundations, and current HBCU presidents. 

• Private-Sector Engagement: Expanded partnerships with the private sector are encouraged, focusing on technology, healthcare, finance, and manufacturing sectors. This engagement is intended to create new opportunities for student programming and institutional growth. 

• Infrastructure and Fiscal Stability: The order emphasizes the importance of infrastructure modernization and fiscal stability, including upgraded technology and institutional planning support. 

• Implementation of the HBCU PARTNERS Act: The initiative supports the implementation of the 2020 HBCU PARTNERS Act, with an emphasis on agency coordination to encourage HBCU participation in federal programs and grants. 

• Annual White House Summit: An annual White House Summit on HBCUs will be convened to foster collaboration and address key priorities for HBCU success. 

Implications for HBCU Leaders 

The order sets an ambitious agenda while steering clear of terms and frameworks that characterized prior administrations’ support for HBCUs. It promotes a model of institutional excellence grounded in workforce alignment, private partnerships, and modernization, emphasizing agency accountability through annual White House reporting. 

Opportunities and Challenges: 

• Opportunities: The order presents new opportunities for engagement and partnerships, particularly in high-growth industries. It also offers a platform for HBCUs to enhance their capabilities and competitiveness for federal funding. 

• Challenges: The departure from DEI-centered support raises questions about funding access and regulatory engagement. HBCU leaders must navigate these changes while ensuring alignment with the new policy language around innovation, infrastructure, and workforce needs. 

Next Steps for HBCU Leaders to Consider 

In the coming months, HBCU leaders and other stakeholders should take a proactive approach in evaluating how this policy shift may impact their institutions. Here are some recommended actions: 

• Review Institutional Goals: Ensure alignment with the new policy language around innovation, infrastructure, and workforce needs. 

• Engage with Federal Channels: Participate in shaping the new initiative and President’s Board of Advisors on HBCUs, particularly in anticipation of the forthcoming White House HBCU Summit. 

• Assess Internal Systems: Prepare for increased scrutiny on fiscal management, technological capacity, and measurable outcomes. 

• Reexamine Partnerships: Identify opportunities for expanded student programming in priority sectors. 

• Monitor Legal Developments: Stay informed about litigation and policy changes that may impact federal funding and compliance expectations. 

Broader Context and Legal Considerations 

This executive order reflects a broader redefinition of federal education policy, moving away from equity-based frameworks. However, this approach is facing legal challenges, particularly regarding DEI programming and civil rights enforcement. Multiple federal courts have issued injunctions against the ED’s directives, suggesting there may be legal limits to how far the administration can push its reinterpretation of civil rights statutes. 

Final Takeaway 

The administration’s reboot of the federal HBCU initiative offers institutions new opportunities for engagement while creating new uncertainties around longstanding federal commitments. As implementation begins, HBCU leaders should prepare for a changed federal landscape, one that reorients support around fiscal strength, workforce development, and performance benchmarks. For more information, institutions are encouraged to contact relevant advisors or legal experts. 

By staying informed and proactive, HBCU leaders can navigate this new federal policy and regulatory approach effectively, ensuring their institutions continue to thrive and contribute to the nation’s economic and educational success. 

How Your HBCU Can Thrive Under New Federal Priorities 

At MGO, we support mission-driven institutions like HBCUs as they navigate regulatory shifts and federal policy changes. Our experienced advisors work with higher education leaders to align institutional strategy with evolving federal priorities—especially in areas like infrastructure modernization, grant compliance, workforce planning, and fiscal health. Whether you need guidance on private-sector partnerships or are preparing for new federal reporting requirements, we’re here to help you thrive in this new landscape. Connect with us today to explore customized solutions that advance your institution’s long-term success. 

The post Navigating the New Federal Landscape: Implications of President Trump’s Executive Order on HBCUs  appeared first on MGO CPA | Tax, Audit, and Consulting Services.