business How to Prepare for a Single Audit December 03, 2021 If your organization expended $750,000 or more in federal funding, you may need a single audit. Here’s what you should know. Did your business receive federal funds either directly or indirectly during the last fiscal year to support continuity of operations and minimize the economic impact of COVID-19? Depending on the government agency involved in distributing the funds, how they disbursed the proceeds, and whether your organization expended $750,000 or more in federal funding, you may need a single audit. Here’s what you should know. The Basics A single audit involves a financial statement audit and a compliance audit. The single audit is different from a standard audit in that it requires applying Government Auditing Standards and Uniform Guidance in addition to generally accepted accounting standards (GAAS). The compliance portion of the audit assesses your organization’s compliance with federal rules and regulations, including those governing each award of relief funds. Important: The government has provided significant financial assistance during the COVID-19 pandemic, leading to a significant uptick in single audits. While Paycheck Protection Program (PPP) loans don’t trigger a single audit, funds distributed via Economic Injury Disaster Loans (EIDL) that met or exceeded the $750,000 threshold do require single audits. 4-Step Process Your organization should follow four steps to help navigate the single audit process: Gather every document and communication pertaining to each source of government funding. Make sure you understand the terms you accepted when your business applied for and received the funding. Pay close attention to the audit requirements and associated deadlines.Review government websites and publications. The Small Business Administration and the Office of Management and Budget, among other agencies, periodically release compliance-related material, which can include discussion of single audits. Review these documents and visit the government agency’s websites often as requirements can sometimes change.Gather and update internal control documentation. To conduct a single audit, auditors will review the design and existence of internal controls, and that they function as intended. Furthermore, the audit team will assess whether the internal controls in place facilitate compliance with the requirements of the awarding entity.Collect the relevant control documentation in advance of the audit team’s arrival. If documentation is missing, set aside time to create it before the audit team arrives, or notify them immediately of the gap.Review how funds were used. To help the audit team understand how your organization used the funds it received, examine your financial records. Make sure they paint an accurate and complete picture from the moment you received the funds to the spending of the last dollar. Like any audit, a moderate amount of preparation can make the process easier to navigate and complete. And since this may be the first and only time your organization will produce a single audit, working with an experienced audit firm can help ensure compliance. Get It Right To determine whether your business must complete a single audit, review any award letters and agreements you signed to receive the funds. For confirmation of the need to perform a single audit or to receive additional guidance, contact us and share the source of every form of federal funding received as part of the government’s COVID-relief efforts. We can help ensure you’re in full compliance with the requirements.