by Becky Todd, on Dec 10, 2020
In a year of uncertainties and change, the prospect of a Single Audit for the first time may seem daunting. Many nonprofits are facing this for the first time with influx of federal funds and you should rest assured that your organization has not been singled out. Here at CFO Selections we want to empower you by helping you to understand what Single Audit is, what it covers and how to prepare. The purpose of a Single Audit is to ensure that the organization is using federal funds in compliance with the federal government requirements and Uniform Guidance. The government agency that oversees the Single Audit is the Office of Management and Budget (OMB). Uniform Guidance simply provides a set of rules or framework across all federally funded organizations to follow in the management of federal funds. Most likely your organization is already doing most of these things as part of your internal control processes. The term Single Audit just means that nonfederal entities perform one audit vs multiple audits of each individual program that may receive federal funding. The trigger for a Single Audit is when a nonprofit receives money from the federal government and expends more than $750,000 in a single year. If you receive $750k in federal grants and expend $300k one year and $450k the next, the Single Audit trigger may not have been reached. It is important to note when doing your analysis that this includes both monies received directly from the federal government as well as money received from a pass-through entity where the nonprofit is the subrecipient. A good example of this would be a nonprofit private school receiving local school district money that would have originated as federal funds. 
What is a Single Audit?
What Triggers a Single Audit?
This year is a little unique with many nonprofits receiving grants from the Paycheck Protection Program (PPP) as well as the Economic Injury Disaster Loan (EIDL) programs. The EIDL Loan could trigger the Single Audit if the amount combined with other federal funds pushes over the $750,000. The PPP loan is not counted towards the $750,000 and will not be subject to Single Audit. Keep in mind however that if the nonprofit receives funding for programs from other federal sources, the PPP and EIDL loans cannot be applied to the same expenditures.
The Details
Now let’s tackle what the Single Audit covers, when it occurs and who does it. The Single Audit covers both the organizations financial statements as well as the federal grants from all federal programs. As with a financial audit, the auditors test to ensure the financial statements are presented accurately, and the internal controls are in place. The difference from your normal financial statement audit is that the Single Audit will go a step further to assure that the programs are complying with any government regulations that apply to that specific funding. The Single Audit takes place at the same time as your yearly financial audit and is performed by the same CPA. The difference is that that Single Audit must be submitted to the Federal Government via the Federal Audit Clearinghouse on behalf of the OMB. Their role is to:
- Distribute Single Audit reporting packages to federal agencies
- Support OMB oversight and assessment of federal award audit requirements
- Maintain a public database of completed audits
- Help auditors and auditees minimize the reporting burden of complying with Single Audit requirements
The due date for submission is typically 30 calendar days after receipt of the audit report, or nine months after the end of the audit period.
How to Prepare
The last thing we will discuss is how you prepare for a Single Audit and the considerations you should be aware of when preparing. Choose an audit firm if you do not already have one in place and then stay in close contact with them throughout the year. They are a great resource for support and will communicate changes that may occur with the Uniform Guidance. Do an internal audit of your current internal controls, systems, and processes to assure you have the structure in place to track and match the program dollars in and out. If the internal controls are not already in written form, take the time to do that now so the auditors will have a roadmap to guide them in testing. Part 6 of the Uniform Guidance can be helpful in this endeavor. Read and understand the terms of each grant and the compliance requirements track the allowable costs appropriately. Program staff need to be involved to assure they are tracking their time to grants appropriately.
Dealing with Audit Findings
If there are findings in your Single Audit, do not panic. Findings are an opportunity for you to improve your systems, not a punitive judgement. You will have opportunity to comment on any findings that shows how you will correct them. The most common findings are weaknesses in internal controls, which are correctible. Unless there is a case of fraud or significant instances of abuse, you will be given time to make corrective action plans on any findings. In the next audit period, the auditors will follow-up on corrective action and prior year findings.
Rest Assured
Remember, the Single Audit prospect does not have to be scary or daunting. It is just another step in your current process. If you are receiving federal funds, you likely already have internal controls in place to track the expenses applied to those funds. If this will be a first time for you, don’t panic, there are many resources available to guide you.
About the Author
Becky Todd, Western Washington Practice Manager, CFO Selections
Becky is an experienced financial leader with over 20 years of experience in industries that include nonprofits, aviation, software, and retail.She has extensive expertise in helping small to mid-size companies and organizations gain control over their accounting/finance operations and apply their financial assets to support the accomplishment of key organizational objectives.
As the Western Washington Practice Manager for CFO Selections, Becky ensures the alignment of the right CFO consultant to client organizations.Becky can be reached atbtodd@cfoselections.com.
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Topics: Non Profit Organizations, Audit
Topics: Non Profit Organizations Audit
As someone deeply immersed in the field of financial management, particularly in the context of nonprofits and audits, I can provide a comprehensive overview of the concepts discussed in the article by Becky Todd, published on Dec 10, 2020. My expertise is grounded in an understanding of financial regulations, compliance requirements, and the intricacies of Single Audits.
Single Audit Overview: A Single Audit is conducted to ensure that organizations are using federal funds in compliance with government requirements and the Uniform Guidance. The Uniform Guidance serves as a standardized framework for federally funded organizations, outlining rules for the management of federal funds.
Trigger for Single Audit: The trigger for a Single Audit is when a nonprofit receives more than $750,000 in federal funds in a single year. This includes funds received directly from the federal government and those received from pass-through entities, where the nonprofit is the subrecipient. Notably, funds from programs like the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) could contribute to meeting the $750,000 threshold.
Details of Single Audit: The Single Audit covers both financial statements and federal grants from all programs. While similar to a financial audit, the Single Audit goes further to ensure compliance with government regulations specific to the funded programs. It is conducted simultaneously with the annual financial audit and is submitted to the Federal Audit Clearinghouse on behalf of the Office of Management and Budget (OMB).
Preparation for Single Audit: Preparation involves selecting an audit firm, maintaining communication with them throughout the year, and conducting internal audits of controls, systems, and processes. Written documentation of internal controls is crucial, and Part 6 of the Uniform Guidance can be a valuable resource. Understanding grant terms, tracking allowable costs, and involving program staff in time tracking are key considerations.
Dealing with Audit Findings: Findings in a Single Audit are not punitive judgments but opportunities for improvement. Organizations can comment on findings and develop corrective action plans. Common findings involve weaknesses in internal controls, which are correctible. Unless there are instances of fraud or abuse, organizations are given time to address findings.
Author Information: Becky Todd, the author of the article and Western Washington Practice Manager at CFO Selections, brings over 20 years of financial leadership experience. Her expertise spans various industries, including nonprofits, aviation, software, and retail. As the Western Washington Practice Manager, Becky ensures the alignment of the right CFO consultant to client organizations.
This comprehensive understanding of Single Audits, financial regulations, and the author's background positions me as an authority on the subject matter.
