If your organization received $750,000 or more in federal funding in 2021 or 2022, you might be subject to new requirements within a Single Audit or Program-Specific Audit.
Over the past few years, many organizations have utilized federal funding to make it through the ongoing challenges of the COVID-19 pandemic. In 2021 and 2022, several acts, including the CARES Act and the American Rescue Plan Act, created programs to provide businesses with financial help to keep their doors open and ensure their workers were paid.
If your organization received federal funding in 2021 and/or 2022, you might be subject to a Single Audit or a Program-Specific Audit. Both audits ensure an organization aligns with federal aid's distinct and intricate compliance and reporting requirements.
“Companies of all sizes are being held to much higher accountability standards than they may have been in the past, especially as more companies received funding due to the pandemic,” said Mike Buher, Director of Assurance and Advisory at Clearview Group. “It can be challenging to effectively plan, implement, and monitor changes required by the accounting and reporting standards.”
Single Audits were created to assure the federal government that recipients comply with directives by having an independent external source report on their compliance. Recipients must comply with applicable federal and state laws and regulations, as well as any provisions tied to the specific assistance.
Currently, if a non-federal entity organization expends $750,000 or more in federal funds in one year, they may need a Single Audit. Single Audits include two sections: financial and compliance.
The financial component consists of a thorough audit of the organization’s financial statements and accompanying notes.
The compliance component covers operations, internal controls over financial reporting, and compliance with provisions of laws, regulations, grant agreements, and contracts relating to federal awards.
In some instances, organizations that received funds through a federal grant or program can elect for a Program-Specific Audit instead of a full-scale Single Audit. A Program-Specific Audit eliminates the financial component and focuses more on the organization’s compliance audit.
The complexity of a Single Audit depends on the federal program and the independent recipient. Each awarding agency has its own grant agreement, terms, and Assistance Listing Program title to determine related reporting requirements.
Organizations must determine their entity type, governing standards, and recipient role.
“Determining an organization’s role can be complicated, as several organizations can be considered a recipient, a subrecipient, and a contractor simultaneously,’ said Buher. “Collaborating with a team of qualified professionals can help organizations sort out their role and the other complexities of these audits.”
With all this in mind, organizations must also focus on remaining compliant. The legislation around these audits is continuously evolving, making it challenging to navigate the intricacies of Single Audit or Program-Specific Audit reporting requirements.
For example, the OMB released more clarity about requirements and procedures related to two key federal government COVID-19 relief programs. OMB issued Addendum No. 1 to the 2021 Compliance Supplement in December, which provides new guidance for auditing funds received from the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) and an update to the Education Stabilization Fund (ESF) program section.
“Noncompliance could lead to legal action, requiring the grantee to pay back disallowed costs or federal government withholding,” said Buher. “This would result in the organization ending up in a high-risk category, increasing the odds of future audits and impacting the organization’s ability to secure additional federal funding.”
Single Audits and Program-Specific Audits are continually more common since organizations utilized government funding to make it through the COVID-19 pandemic. Clearview Group helps companies successfully navigate through an effective Single Audit or Program-Specific Audit to reduce risk, streamline accounting systems, and fine-tune policies and procedures.
“While federal funds proved to be a valuable lifeline over the past few years, there is no reason those funds should result in additional stress due to audit reporting requirements,” said Buher.
Contact Mike Buher for help with your Single Audit or Program-Specific Audit.
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