Single Audit Basics

Posted on Wednesday, September 28, 2022

If your organization spends $750,000 or more of federal money during the fiscal year, you will likely need to have a Single Audit performed. 

Who is required to undergo a Single Audit?

Nonfederal entities that expend $750,000 or more of federal awards in a fiscal year.  Federal also includes any funds passed down from the federal government through state or local governments or other nonprofits. 

What is a Single Audit?

A Single Audit is a compliance audit that includes the audit of the financial statements and an audit of compliance with federal statutes, regulations, and the terms and conditions of federal awards.  A Single Audit has two components – (1) an audit of the organization’s financial statements and reporting on the supplementary schedule of expenditures of federal awards (SEFA), and (2) a compliance audit of federal awards. 

What is a SEFA?

The nonprofit (auditee) is responsible for preparing the SEFA.  The SEFA is a list of all the federal awards expended by the organization.  The SEFA should include each federal program by federal agency, the name of any pass-through entities, the Assistance Listings number, the amount of federal funds expended for each federal program, and the amount provided to any subrecipients for each federal program.

What is a compliance audit?

In addition to determining whether the financial statements are presented fairly, in all material respects, in accordance with generally accepted accounting principles (or a special-purpose framework), the organization’s compliance with federal awards must be audited.  The auditor must obtain an understanding of internal control over federal programs and perform tests of controls.  They must also determine whether the organization has complied with federal statutes, regulations, and the terms and conditions of federal awards subject to the audit.  Basically, the auditor needs to make sure the funds were used what they were supposed to be used for with proper controls in place.

How does the auditor know what to test?

The Compliance Supplement issued each year by the OMB (Office of Management and Budget) includes a listing of government programs by department (i.e. Department of Education, Department of Housing and Urban Development, etc.) and Assistance Listings number (formerly CFDA number).  There are 12 different compliance requirements that are applied to each program but not all requirements apply to each program. 

Requirements

• Activities allowed or unallowed
• Allowable costs/cost principles
• Cash management
• Eligibility
• Equipment real property management
• Matching, level of effort, earmarking
• Period of performance
• Procurement suspension & debarment
• Program income
• Reporting
• Subrecipient monitoring
• Special tests and provisions

These requirements help the auditor determine what to test for each grant. 

What is included in the audit report?

In addition to the financial statements included in a financial audit, the audit report for a Single Audit also reports on any problems with internal controls, compliance, and questioned costs.  The auditee is responsible for any follow-up or corrective action on all audit findings and must provide a plan to address each of the audit findings.  The Single Audit report is also uploaded to the Federal Audit Clearinghouse (FAC) and complete Form SF-SAC, Data Collection Form for Reporting on Audits of States, Local Governments, and Non-Profit Organizations. 

Who can perform a Single Audit?

Not all auditors are able to perform Single Audits.  The auditor must understand and be able to apply the requirements of Government Auditing Standards and the Uniform Guidance, so they are required to have special continuing professional education (CPE) in these areas. 

If your organization receives any type of government funding, make sure that you know the initial source of the funds and that you track the funds received and spent so that you can determine if a Single Audit is required.  A Single Audit requires more work and costs more than a financial audit, so it is best to prepare your organization ahead of time.  Feel free to reach out to DWD with any questions regarding Single Audits as we have the proper CPE and experience to perform these types of audit.

Contributed by: Carrie Minnich, MAcct, CPA | Partner | DWD CPAs & Advisors

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.