So, You Need a Single Audit*…

As a not-for-profit organization with Federal grants, the term “Single Audit*” may be unfamiliar or scary. After all, who wants to be audited?  But this is an essential part of the federal monitoring of the funds disbursed for use all over the country.  Understanding the process allows for better results and a less stressful audit!

The Basics:

A Single Audit, also referred to as an audit under the Uniform Guidance, is an audit of compliance with selected Federal regulations that apply to one or more “major programs.”  It also includes an audit of the financial statements and consideration of internal controls over both financial reporting and compliance.  The end result of a Single Audit is a set of financial statements including a Schedule of Expenditures of Federal Awards (SEFA) and three auditor’s reports: A report on the financial statements, including an opinion on whether those financial statements are materially in accordance with generally accepted accounting principles; a Government Auditing Standards or “Yellow Book” report that does not provide an opinion, but addresses internal control deficiencies items discovered in the audit; and the Single Audit or Uniform Guidance report, which includes both an opinion on compliance and a section for internal controls over compliance, which describes any deficiencies noted in that area. The reporting package also includes a Schedule of Findings and Questioned Costs (SFQC), which is where the auditor will report their findings – which could be deficiencies in internal controls, accounting errors, noncompliance, and many other items. These financial statements, reports, and the SFWQC are required to be uploaded to the Federal Audit Clearinghouse within 9 months of year-end and certified by both the auditee (organization) and the auditor.

A Single Audit is required when total expenditures of federal awards in a single year exceed $750,000 (for years ending prior to September 30, 2025) or $1,000,000 (for years ending on September 30, 2025, or later). This is computed on the expenditures for all federal awards, not on a grant-by-grant basis. Non-cash items received from the federal government are included for this calculation, as are balances of some loans that are payable directly to the federal government and awarded under a Federal award.

An independent auditor associated with the American Institute of Certified Public Accountants (AICPA) must perform the Single Audit.

What To Expect in a Single Audit

In a financial statement audit, the auditor needs to obtain an understanding of internal controls and the finances of the organization, as well as determine if the financial statements are materially correct. Adding in the Single Audit requirement requires the auditor to obtain an understanding of the grant activities and dive much more deeply into internal controls within the financial areas and internal controls over compliance.  Compliance with the Federal awards deemed “major programs” will also require significant audit work, which typically includes requesting support for costs charged to the program, reports filed, access to documentation such as eligibility determinations, and support for compliance with other grant terms, as set out by the Office of Management and Budget (OMB) in the Compliance Supplement, which is issued every year and contains information for auditors to use in testing specific requirements for many different Federal programs.

Generally, the auditor will determine which major program(s) will be tested early in the process and will focus requests for documents and support on the areas of those programs that are specified in the Compliance Supplement. The auditee should be prepared to share grant agreements and documents, information on policies and procedures, access to employees who work with the program, and supporting documentation as the audit progresses.

A brief overview of the most common requirements audited follows:

Activities Allowed: Were grant funds spent in accordance with the purpose of the grant?

Allowable Costs: Were the costs charged to the grant both allowable (following the Cost Principles in 2 CFR 200 Subpart E) and allocable (directly associated with the grant, or properly allocated to the grant)?

Cash Management: Were grant funds drawn down in advance properly handled and promptly spent, or were grant funds requested for reimbursement for previously incurred expenses?

Eligibility: Were the individuals, sub-recipients, or areas served by the grant eligible for that assistance?

Equipment Management: Was equipment purchased with grant funds used for the grant, tracked and maintained? If any such equipment was disposed of, was the Federal granting agency properly notified?

Matching: If the Organization was required to provide a cash match, did the funds come from an allowable source (generally, other Federal funds cannot be used for this purpose)? If there was a match to be met in-kind, was the amount used calculated at fair market value?

Period of Performance: Were grant funds obligated and spent within the required timeframe?

Procurement, Suspension, and Debarment: Were federal procurement rules complied with and were vendors and sub-recipients in good standing for Federal contracts and awards?

Reporting: Were reports required by the program filed timely and accurately?

Subrecipient monitoring: if subawards were made, were the subrecipients properly selected and monitored?

As can be seen, not all of these requirements are strictly financial. It’s important that employees with knowledge and experience in all relevant areas are available to assist the auditor, not only the accounting and finance staff.

Understand the Single Audit Process with Confidence

Being prepared for a Single Audit starts with understanding the process, knowing the compliance requirements, and working closely with your auditor. A proactive approach can help identify potential issues early and strengthen your organization’s financial management and internal controls. Going through a Single Audit can also highlight areas where policies and procedures may need adjustments and provide opportunities to think outside the box by leveraging your auditor’s experience. Don’t be afraid to ask questions along the way! If you have any concerns or need guidance, reach out to your CRI advisor. We’re here to help make the process smoother and ensure you stay in compliance with confidence.