What is a Single Audit?

Nonprofits that expend more than $750,000 in direct federal funding or federal funding passed through the state or other agency during the fiscal year must have an audit in accordance with Uniform Grant Guidance. This audit is performed in addition to the Organization’s financial statement audit.

Under a Single Audit, auditors understand and test internal controls, as well as compliance, in order to provide an opinion on the Organization’s compliance with selected federal awards. The completed audit must be submitted to the Federal Electronic Clearinghouse typically within 30 days of receipt of the auditor’s reports or 9 months after the end of the audit period.

OMB Compliance Supplement

To prepare for the audit, a good place to start is the OMB compliance supplement. This is a great resource for auditees and includes directions on how and what the auditor should be testing for specific funding. The auditee should review the Supplement for any funding they receive and review what the OMB is guiding the auditors to test.

The Supplement also includes a listing of the compliance requirements under Uniform Guidance and suggested audit procedures under each in Part 3 of the Supplement. By using the Supplement, an auditee could determine what compliance requirements are applicable to their CFDA number of their award. The auditee can then review Part 3 of the Supplement to determine what testing the auditors are recommended to perform and the samples they will likely take.

What are the Compliance Requirements? Any tips/common pitfalls to avoid?

• Activities Allowed or Unallowed – Your contract and compliance supplement will specifically identify any items that are not allowed to be purchased with the federal funding. Common unallowable expenses include entertainment, alcohol, company parties and certain travel expenses.
• Allowable Costs/Cost Principles – Costs charged to federal funds must be necessary and reasonable for the performance of the federal award. Always refer to your unique contracts to be in line with these principles.
• Cash Management – Many federal contracts are cost reimbursement. Be careful that you are requesting reimbursement for expenses that your Organization has already paid and incurred.
• Eligibility - In some cases, a state or federal Agency will send clients to your Organization directly. In these cases, you still want to make sure they meet the requirements of the program.
• Equipment Real Property Management – Make sure to use the equipment in the program it was acquired for and to take an annual inventory of any equipment for your records.
• Matching, Level of Effort, Earmarking – some programs require matching or cost sharing which means your Organization needs to match funding at a specific amount or percentage of the federal awards. Know this ahead of time so you are prepared to complete the match if needed.
• Period of Performance - Oftentimes program budgets do not align with the same dates as an Organization’s fiscal year. Make sure costs are charged accordingly to the proper period.
• Procurement Suspension & Debarment – Below we discuss the need for a documented procurement policy. Document it and follow your regulations!
• Program Income – when your program generates income, make sure your internal controls prevent the income from being diverted to another program
• Reporting – there are many reporting requirements for federal programs – make sure to keep accurate records and submit all reports timely.
• Subrecipient Monitoring – when you are responsible for giving federal funds to other Organizations, it is your responsibility to monitor their controls and ensure they are also having a Single Audit if needed.
• Special Tests and Provisions – read your contracts and stay in touch with your program contacts as these can change annually.

What General policies are Organizations required to have under Uniform Guidance?

There are certain policies that are required under Uniform Guidance if the organization receives federal funding. You want to make sure you have the following written and approved policies:

• a conflict of interest policy
• a record retention policy
• and a procurement policy.

How can I avoid a Single Audit finding?

To complete the audit, the auditor will issue an opinion on whether the auditee materially complied with compliance requirements and if there were any deficiencies in compliance controls. To avoid any findings, the auditee should understand all the compliance requirements that are applicable to the funding they’ve received and design effective controls around those compliance requirements. Monitoring those controls to ensure their effectiveness is essential for organizations to reduce their exposure to potential non-compliance.

If you have questions regarding Single Audit compliance, or want to know how we can help you prepare for your Single Audit contact us.