Single Audits: When Does an Organization Need One, And Can It Use Their Current Auditors?

If your organization receives federal funds, it may be facing the question of whether it’s required to obtain a single audit, also known as Uniform Guidance Audit. A single audit includes both an audit of an organization’s financial statements and compliance with federal award requirements for programs that are considered major programs based on a risk assessment performed by the auditor.

Organizations that expense more than $750,000 in federal funds in a fiscal year are required to obtain a single audit. While this distinction may seem simple, there are several complicating factors that organizations must evaluate to determine whether they are required to obtain a single audit – all of which we’ll explore in this overview.
If it’s determined that your organization does require a single audit, it’s important to select an assurance firm with experience performing single audits. These audits demand a different approach to a traditional financial statement audit and must be carried out by assurance professionals with specialized training. Understanding these requirements ensures that your organization chooses an audit firm that’s well-qualified for the job.

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

When Do I Need a Single Audit?

At first glance, the determination of whether an organization needs a single audit seems relatively straightforward. The U.S. Department of Treasury guidance specifies the following:

“Single Audits are required from all recipients who expend $750,000 or more in aggregate federal financial assistance within their fiscal year.”

There are a couple of important distinctions within this definition that organizations must consider.

Timing of Fund Expenditures

A single audit is required when an organization expenses over $750,000 of federal funds in a fiscal year. There are two important definitions here: expenses and fiscal year.

An organization might receive more than $750,000 of federal funds in a fiscal year, but if it does not expend over $750,000 of these funds, it is not required to obtain a single audit. This makes robust accounting important. If an organization does not book expenses into the correct accounting period, it may face issues determining whether it needs a single audit.

The $750,000 threshold for fund expenditures is applied over an organization’s fiscal year. Many federal grants are awarded over multiple years. From a single audit perspective, what’s important is not the total amount of grant funding, it’s the amount expensed in a single fiscal year.

Correctly understanding these requirements is vital, particularly for organizations with federal funds expenditures close to the $750,000 threshold. Single audits are subject to submission deadlines that depend on the organization’s fiscal year end. If an organization does not learn it requires a single audit until issues are uncovered during a financial statement audit, they may experience challenges to submit a single audit before the required deadline.

Receiving Funds from Different Sources

Organizations often receive federal funds from multiple sources – whether it’s different government agencies, state and local governments, or other nonprofit organizations tasked with administering grants on behalf of the federal government.

The threshold that determines whether an organization requires a single audit is an aggregate threshold. If the sum of all federal funds expensed is over $750,000, a single audit is required. The threshold is not specific to each individual grant.

Many federal funding programs are administered by state and local governments, or by larger nonprofit organizations. Organizations should take steps to discern the original source of any grant funding they receive.

This information should be contained in the grant documentation, but if it is not easily available, organizations should ask the awarding organization for further information to clarify the source of the funds and determine any associated compliance requirements. One key distinction to identify here is whether your organization is labeled as a contractor or an award recipient. Funds that are expensed as a Contractor are not to be considered in the $750,000 threshold requirement.

When an organization’s federal expenditures exceed the $750,000 threshold, and all funds come from a single grant, the organization may have the option to have a single audit or a program specific audit. An assurance firm can advise the best option for your organization.

Determining whether your organization needs a single audit boils down to having a reliable accounting infrastructure to track expenses, plus a comprehensive understanding of the source of the grant funding. By proactively understanding the single audit thresholds and closely managing federal expenditures, leaders can ensure they have a clear understanding of their compliance requirements.

Even if your organization does not meet the single audit threshold, it is still required to track federal funds in a certain manner and implement specific internal controls and processes. Each grant has specific requirements and it’s vital that organizations understand these.

Auditor for Single Audit: Can I Use My Current Auditors?

Single audits are typically performed by CPA firms. It’s important to note that single audits are a complex type of audit that demand specialized knowledge of a wide range of compliance standards.

Organizations should endeavor to work with an audit firm with significant experience undertaking single audits. Every individual who works on a single audit is required to undergo a specific amount of professional education each year related to government accounting standards.

If your current auditors are experienced in single audit work, continuing to partner with them is likely the best course of action. If not, look for a firm with experience performing single audits across a wide range of industries and government programs – a firm like Smith + Howard.

Smith + Howard: Experienced Single Audit Professionals

Taking a proactive approach to understanding your organization’s compliance requirements when expensing federal funds is key to ensuring your nonprofit remains in compliance. Organizations should evaluate whether they expect to have a single audit requirement as soon as they receive federal funds and should ensure that they have the appropriate accounting infrastructure to accurately track federal expenses.

At Smith + Howard, our single audit professionals bring a wealth of experience working with nonprofit organizations. With a proven track record performing single audits for specific grants, our team brings a deep understanding of the single audit process and associated compliance requirements.

To learn more about Smith + Howard’s single audit services, contact an advisor today.