Single Audits

Posted on Wednesday, July 02, 2014

Each year the Federal government provides grants to non-Federal entities (state and local governments and nonprofit organizations).  To ensure that the money granted to non-Federal entities is properly spent, the government requires all non-Federal entities that spend $500,000 or more in Federal awards during a fiscal year to obtain an audit in accordance with the Single Audit Act of 1984, as amended in 1996.  Federal funds include all funds originating directly from the federal government or those funds that were passed through another entity (i.e. state or local government) and ultimately received by the non-Federal entity.  The 1984 act established uniform audit requirements and an organization-wide audit process for state and local governments.  The 1996 amendment added nonprofit organizations to those required to have a single audit and also increased the expenditure level requirement of Federal programs from $25,000 to $300,000.  The threshold was later increased to $500,000 in 2003.

The Single Audit act requires audits to be conducted in accordance with Office and Management and Budget (OMB) Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations.”  This is why single audits are often referred to as A-133 audits.  The Circular sets consistent and uniform audit standards for those audits required by the 1996 amendment.  The Circular A-133 Compliance Supplement provides guidance on testing Federal program compliance requirements.  There are 14 types of compliance requirements that may apply to a Federal program.  In addition, the audit must be done in accordance with Government Auditing Standards.  These standards, commonly referred to as “Yellow Book,” are issued by the United State General Accounting Office for auditing government organizations and programs.

The single audit combines the annual financial statement audit with additional testing of federal funds received.  Recipients of federal funds are subject to one audit of all their federal programs (single audit) versus separate audits of each federal program.  There are also additional reporting requirements related to a single audit with specific deadlines.  With the additional requirements and testing, single audits take more time and are more costly than regular financial statement audits.

In late 2013, the OMB announced that the threshold for single audit requirements would be increased from $500,000 to $750,000 for fiscal years beginning on or after January 1, 2015.  The government expects the increased limit will relieve approximately 5,000 nonfederal entities from the single audit requirements. 

Posted by: Carrie Minnich, CPA

Posted in Mission Minded Nonprofits

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