How to Handle and Respond to Findings in a Single Audit

When an organization is subject to a Single Audit, the auditor may uncover issues that need to be corrected. If the organization wants to stay in compliance and remain eligible to receive federal funding in years to come, it must take sufficient steps to resolve the issues that were found during the audit process.

When findings occur, the auditee (the organization being audited) is responsible for compiling the report and proposing corrective actions to mitigate these issues. Moreover, because this is all public record, it is critical that organizations follow through with these corrective actions and address all findings in a timely manner. 

This process typically involves preparing a Corrective Action Plan (CAP), which outlines the actions the organization is taking to remediate the issues found in the audit. This reassures the relevant federal agencies and regulatory bodies that the organization has a detailed, realistic plan to correct the findings of the single audit.

In this overview, we’ll explore the steps organizations must take to respond to single audit findings and prepare and manage a comprehensive CAP.

This is the fourth article in our five-part series on Single Audits. To learn more, read our other articles: 

• Single Audits: When Does an Organization Need One, And Can It Use Their Current Auditors?
• How to Prepare for a Single Audit
• Uploading Your Single Audit to Federal Audit Clearinghouse

What Is a Finding?

In a single audit, a “finding” is a discovery made by auditors while they’re auditing an organization’s financial records and compliance with relevant federal funding programs. 

These findings can vary in seriousness. Some may be small issues, like simple calculation errors or missing receipts. Others may be more significant, such as a notable pattern of inappropriate time and effort report, charging unallowable costs to the grant or failing to follow important conditions of federal funding programs. The auditor will include context and specifically describe the error that was made, highlighting their sample and the relevant error.

When a finding is made, the auditor typically explains the relevant rules and makes recommendations on how to resolve it. For example, the auditor might recommend additional training for staff and volunteers, creating new procedures for internal controls, or regular reviews to ensure the organization stays compliant. However, after these recommendations are made, the onus is on the organization to respond to the findings in a timely manner.  

Preparing a Corrective Action Plan and Summary Schedule of Prior Audit Findings

Once the auditor has delivered findings to the organization, the organization must prepare a corrective action plan. The corrective action plan must be attached to Federal Audit Clearinghouse submission when the single audit is uploaded to the federal site.  

The correct action plan is a detailed report outlining the specific steps the organization plans to take to address each of its findings. This typically includes what caused the findings, how the organization plans to correct them, who oversees and implements the corrective actions, the proposed timeline, and how progress will be measured.

While the auditor provides information to inform these documents, it is solely the responsibility of the organization to prepare and upload them.

A typical Corrective Action Plan includes: 

• An outline of the specific findings identified, including the nature of the problem, what caused it, and its potential impact 
• A root cause analysis going into more detail about why the problem occurred, what factors contributed, and specific weaknesses in process or controls
• Specific proposed actions or measures to resolve the findings and prevent them from happening again. 
• Who is responsible for each corrective action, their roles and responsibilities
• A timeline for implementing and completing the corrective actions to assist with progress tracking
• Any resources needed to support the corrective actions, such as personnel, funding, training, or technology
• How they plan to monitor progress and track the effectiveness of corrective actions, such as regular reviews, KPIs, or milestones 
• Documentation regarding any corrective actions that were already taken

When an organization has had audit findings in past audits, it is required to prepare a document called the Summary Schedule of Prior Audit Finding.  While the specific contents vary depending on the organization and the issues found, a Summary Schedule of Prior Audit Findings may include: 

• Summaries of financial statements related to the findings, including important balances from prior audit
• A list of findings identified in the auditor’s report, including the number and nature of them
• The results of organization’s corrective actions planned and process improvements
• Conclude on the prior audit finding if it has been resolved or is a repeat finding. 

It is recommended that both documents be prepared on company letterhead and include the signature of an individual in leadership who is responsible for overseeing the process. This helps demonstrate that the organization prepared the documentation rather than the auditor and underscores their accountability to it.

Following Up on Corrective Action Plans

Once findings have been identified and a Corrective Action Plan implemented, the next steps vary depending on the severity of the findings. 

Organizations tend to be at increased risk when they do not adequately respond to the findings in their audit and have repeat findings on a year-over-year basis. Generally, organizations that fail to adequately respond to single audit findings by following the Corrective Action Plan face higher levels of scrutiny from regulators and funding agencies. If these are consistently repeated, an organization’s federal funding could come into question.  

Organizations can perform internal follow-ups and maintain detailed records of all corrective actions and results to mitigate this risk.

Smith + Howard: Experienced Single Audit Professionals

When your organization is subject to a Single Audit, the process of responding to it may seem overwhelming. As the auditee, you must prepare and upload your filings, formulate and commit to a Corrective Action Plan, and follow through with all recommendations 

While the documentation is your responsibility, you are not alone. With an experienced auditor to guide you, you can identify the best corrective actions and strengthen your organization so that these issues do not reoccur.

Smith + Howard brings a wealth of experience to the Single Audit process. Our experience serving the nonprofit community makes us an ideal partner to guide you through this complex process.

Contact an advisor at Smith + Howard today to learn more about our Single Audit services.