Non-Profit
Single Audits: Everything You Need to Know
Facing a single audit for the first time? You’re not alone. In this article, we break down what a Single Audit is, how it’s done, and how you can prepare.
Single Audits are nothing new. Since 1984, when the federal government passed the Single Audit Act, organizations that spend a certain amount of federal dollars in a given fiscal year have been required to perform a Single Audit. (It’s called a “Single Audit” because it brings together audits for multiple federal awards.)
Recently, however, more organizations have been required to undergo Single Audits for the first time.
That’s in large part due to COVID-19. Since the beginning of the pandemic, the federal government has awarded billions of dollars through the CARES Act to both non-profit organizations and businesses. And while these funds have helped many organizations endure the last two years, there are a few strings attached.
One of those strings? If an organization spends more than $750,000 of qualifying federal funds in a given fiscal year, they are required to undergo a Single Audit. Due to the increase in federal dollars awarded in recent years, many organizations crossed the $750,000 mark in FY2021, and are therefore required to perform a Single Audit. More money awarded, more single audits.
Unfortunately, it’s not always easy for an organization to determine whether they have crossed the $750,000 mark. Certain federal funds – like the Payment Protection Program, from which many U.S. organizations have been awarded funding – do not count toward the total funds measured against the $750,000 mark.
Meanwhile, certain funds may have been awarded by the state government or other entities, but in fact originated from the federal. These are known as “Pass Through” funds.
Grants awarded by the state are often a mix of federal and state dollars. For example, a $2 million grant from the State of Illinois may in fact be composed of $400,000 in state funds and $1.6 million in CARES funds that originated from the federal government. Therefore, $1.6 million of that grant would count as qualified federal funding.
(Note: Certain state and local programs also require a single audit.)
What happens during a Single Audit? First of all, a Single Audit is performed by a qualified third-party, such as the CPAs at Dugan & Lopatka. Using Uniform Guidance – essentially a rule book for auditors – an auditor will determine whether an organization has followed federal guidelines for the expenditure of awarded funds. They will review the organization’s financial statements for accuracy, ensure they have proper controls in place, and assess their compliance with the programs that awarded the federal funds.
How to prepare
Start by drafting your SEFA, a document that compiles your organization’s total federal expenditures during the fiscal year and shows whether a Single Audit is required.
Next, consolidate your financial records, including expenditure justification and any other relevant reports, along with any documentation related to the grant. Make sure you are familiar with the terms of the awarded grants.
Finally, review your policies and procedures – focusing on cash management, eligibility, allowability of costs, sub-recipient monitoring policies, and procurement – and identify any discrepancies between your organization’s practices and those required by the federal programs that awarded funding. Any discrepancies should be addressed before the Single Audit.
How we can help
Preparing for a Single Audit is a lot of work, especially if this is the first time your organization is required to do so. But with the right help, the Single Audit process can be smooth and hassle-free.
For nearly 50 years, our CPAs have partnered with numerous nonprofits to navigate various stages of an organization’s financial journey, including Single Audits. We can help you get organized, address compliance requirements, and answer any questions along the way. Then, when you’re ready, one of our qualified auditors can perform the Single Audit.
Questions about Single Audits or any of our services for nonprofits? Contact our team today.