Explore the critical aspects of Single Audits and why they are essential for organizations receiving federal funding. Learn how to determine if your organization needs a Single Audit, understand the compliance landscape, and discover practical steps to ensure a successful audit process.
A Single Audit is conducted by an external audit firm. It audits an entity’s financial statements and compliance with federal awards. These audits ensure that entities like non-profits, medical facilities, governmental entities, or other non-federal companies comply with current federal regulations.
Single Audits also give your entity’s board of directors or management the transparency and accountability needed to build and continue gaining federal funding opportunities.
To determine if your organization needs a Single Audit, you must first determine if it meets the threshold of expenditures in a year. For a non-federal organization, the threshold is $750,000 or more expenditures of federal funds in an organization’s financial year.
It’s important to note that the thresholds for a Single Audit can change, as seen in the most recent updated Uniform Guidance. This revision was made in April 2024, and as part of that guidance, the Single Audit threshold increased from $750,000 to $1,000,000. The effective date for this change is for audits with periods beginning on or after October 1, 2024.
Federal award funding can be received directly from a federal agency or passed through to your organization by other organizations, like your state or other contracted entities. Understanding how your organization receives federal funding can also determine if it triggers a Single Audit requirement.
For example, the Federal Government often provides grants to states for infrastructure, such as road and bridge repairs. Depending on your state structure and grant structure, this grant is often given to local government entities to complete the infrastructure projects in their local area. The state government will then pass through the federal grant to the local government, and in turn, the local government will spend the funding to complete the work.
If that occurs, the compliance burden will fall on the local government spending the funding to complete the grant requirements for the infrastructure repair. The funding spending would then be a factor in determining threshold requirements for a Single Audit for that local government, even though it did not directly receive the grant from the Federal Government.
As mentioned, different types of organizations are more likely to require a Single Audit. These can be for-profit or not-for-profit organizations, medical facilities like personal care facilities, rehab centers, medical centers, biotech labs, or governmental entities like cities and counties.
Once you determine if your organization meets the threshold and you have completed your Single Audit, you must submit it to the Office of Management and Budget (OMB) through the Federal Audit Clearinghouse within a specific time frame. You’ll also need to ensure a trusted CPA conducts your Single Audit, which will be crucial for the future success of your federal funding and can help ensure compliance.
Noncompliance with federal grants can lead to fines, penalties, and even repayment of federal funds or complete termination of a grant. It is important to follow all federal compliance regulations when using federal grant funding.
The Code of Federal Regulations and the OMB Compliance Supplement are essential to understanding the extent of your grant regulations. Common regulated areas are allowable costs, cash management, reporting, and procurement. However, what is regulated is extremely grant-specific.
Understanding your grant and the current OMB Compliance Supplement is critical to passing your Single Audit, with all the compliance requirements being extremely grant-specific.
Unfortunately, many organizations discover they’re out of regulation after spending federal award funding. These organizations are then at risk of non-compliance and potential repayment of the federal award funding after project completion. This often occurs because companies are either first-time federal award recipients unaware of the compliance requirements or do not have the funding available to hire a grant manager or external firm experienced in federal award funding.
Preparing for a Single Audit involves several crucial steps to ensure compliance and avoid potential pitfalls. By following these guidelines, your organization can navigate the audit process smoothly and maintain eligibility for future federal funding.
“Setting up a good internal control policy is the most important step in preparing for the audit.”
“Setting up a good internal control policy is the most important step in preparing for the audit,” said Dani Schooley, Senior Auditor at Clearview Group. “Since Single Audits are audits that require control testing on some level, having controls in place, even simple ones, are important to the preparation for a Single Audit in avoiding a negative outcome.”
When your organization consistently receives federal awards, it’s important to understand that regulations can vary from grant to grant, year to year. Therefore, having a plan to update staff knowledge and grant management procedures regularly is a must.
In addition, having strong internal controls in place is a key part of adhering to federal award compliance. With these measures, your entity will more routinely pass Single Audits without major compliance issues.
“Keep a basic internal control policy in place and do monthly reconciliations for all balance sheet and revenue accounts.”
“Keep a basic internal control policy in place and do monthly reconciliations for all balance sheet and revenue accounts,” said Schooley. "When clients perform these tasks and truly implement them, they find errors quickly and can rectify them quickly."
“As a result, their audit goes smoothly, is completed much faster, and their accounting records are more accurate.”
Although federal awards have high compliance requirements, they can greatly benefit your entity, as they can provide more consistent funding than grants or donations from other organizations. Grants.gov is a great resource to see if your organization has grants that could be beneficial. Federal awards can provide relief for your local taxpayers, push your organization’s goals into reality, or help reduce reliance on your donors to meet your mission.
“We’ve helped numerous non-profits work through their prior Single Audit Findings, helped management work through how to rectify their findings, and found procedures that work for them in correcting the findings for future audits,” said Schooley.
“For example, we had a client who had fraud from an external source gain funding from their cash deposits. It turned out the controls they had in place, along with the controls their bank had for distributing wired funds, were weak. Therefore, upon discussions with management, they updated their controls over cash distribution and switched to a bank with stronger controls over their wire transfers.
“With our team’s help and expertise, this was implemented before audit completion, which prevented the organization from losing additional funding."
“With our team’s help and expertise, this was implemented before audit completion, which prevented the organization from losing additional funding.
“Another client we worked with consistently needed to return funding to their grant provider due to incorrect report completion. Our team helped them better understand their SF-425 (Federal Financial Report), find better record-keeping methods, and eliminate the need to return funding in future years to their government grantor.”
Overall, if your organization is considering federal awards, it is highly recommended that you seek the right experts before spending your funding. Whether you’re consulting about the grant management process, pre-audit bookkeeping cleanup, or seeking a Single Audit firm provider, Clearview Group has vast experience in federal award management and Single Audits.
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