You Have Single Audit Questions, We Have Answers
You Have Single Audit Questions, We Have Answers
2020 presented organizations with a wide range of challenges that threaten their survival, from COVID-19 to the ensuing economic recession. While financial challenges have been particularly difficult for many entities, increases in government funding have helped organizations weather this particular storm. However, federal aid comes with challenges of its own—this year, many organizations, including both nonprofits and for-profits, will find themselves subject to a Single Audit for the first time.
Whether it’s your first time preparing for a Single Audit or you’ve had extensive experience, the process can appear overwhelming and confusing. To help you find your feet, we’ve put together a FAQ that will put you on the road to understanding your Single Audit requirements and what you need to do to prepare.
What is the Single Audit?
The Single Audit is a strict and comprehensive financial statement and federal awards audit which must be completed by any entity or organization that expends $750,000 or more in federal funds in one year. The Single Audit, typically performed annually, is intended to ensure an organization is using its federal funds correctly and is in compliance with all applicable compliance requirements and regulations.
A Single Audit covers the operations of the entire entity. There are two parts to a Single Audit: the financial statement audit and the compliance audit. The financial statement audit goes beyond the standard audit (which is performed in accordance with only generally accepted accounting standards (GAAS)) and is performed in accordance with Government Auditing Standards (GAS) as well. These standards include a requirement to report on internal controls over financial reporting and on compliance with provisions of laws, regulations, contracts and grant agreements.
The compliance audit focuses on whether the entity is following the requirements of federal statutes, regulations and the terms and conditions of their federal awards. Based on the requirements outlined by the Federal agency who awarded the funds and the type of entity you are, you may only be subject to an audit in compliance with GAS, which is less complex than the full compliance audit.
Which entities and organizations need to complete a Single Audit?
The short answer: if you spent $750,000 or more in federal funds in your fiscal year, you’ll need to complete a Single Audit.
The long answer: whether or not you need to complete a Single Audit depends on the requirements established by the Federal agency. The financial assistance listings available on beta.sam.gov can assist in making this determination.
As such, if you received any federal assistance this year, you should get a professional opinion to determine whether or not you are subject to a Single Audit.
Please note that even if you are not subject to a Single Audit, if your entity or organization received federal funding you are still required to comply with all of the federal compliance requirements and maintain relevant documentation. Even if you are not subject to a Single Audit, a federal agency may request documentation or perform an internal review.
What programs are subject to the compliance portion of the Single Audit?
The programs identified as “major programs” utilizing the guidelines in the Office of Management and Budget's (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) are determined by the independent auditor. This is a complex determination that utilizes the specific requirements in the guidance. Once identified, these programs are the ones that are subject to the compliance portion of the Single Audit.
As a result of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, Congress allocated hundred of billions of dollars or aid through various programs that may be subject to the Single Audit requirement. However, funds distributed through the Paycheck Protection Program (PPP) are not subject to Single Audit requirements, but do have their own compliance guidelines recipients must follow.
When is the Single Audit due?
For nonprofits, typically the Single Audit reporting package must be submitted to the Federal Audit Clearinghouse (FAC) utilizing the Data Collection Form (DCF) either within 30 calendar days after receiving the auditor’s report or nine months after your fiscal year end, whichever comes first.
Currently, for-profit entities only have to supply the results of the audit directly to the federal agency or pass-through entity requiring the Single Audit.
Are the results of the Single Audit made public?
For nonprofit entities, the results are typically made public. The notable exception to this rule is Native American tribal governments, which are not required to release their audit reports publicly.
Currently, for-profit entities that must have a Single Audit are not required to complete the DCF and submit this to the FAC, so their reporting package is not public information. However, this could change.
Who can perform the Single Audit?
Single Audits are performed by independent auditors, usually certified public accountants (CPAs). In effect, you can’t have someone within your organization perform your Single Audit. Independent auditors who perform Single Audits must regularly complete specific continuing education courses as required by GAS, given the specialized nature of this work.
What are the risks if you miss the deadline or mess up your Single Audit?
The consequences of missing your Single Audit deadline or being found noncompliant can be costly and time-consuming. If you are found noncompliant, the federal government may withhold funds until the deficiency is remedied, completely suspend or terminate the award, initiate suspension or debarment proceedings or withhold further federal awards for the program. The government may also pursue other available legal actions.
Note: On December 22, 2020, the Office of Management and Budget (OMB) released a compliance supplement addendum that outlines important Single Audit information for organizations that accepted federal COVID-19 relief funding. For more information, please visit “The Latest in COVID-19 Funding Compliance Guidance.”
Not sure how to get started? Reach out or listen to our recent webinar.