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What is a Single Audit and Does Your Organization Need One?

This article was written and produced by Kyle Lyskawa, CPA, Healthcare Tax-Exempt Manager. Looking to get in touch with Kyle? Reach out today: klyskawa@bonadio.com.

As a result of the pandemic and the various federal relief programs passed by Congress, many tax-exempt organizations received significant amounts of federal funding. Most of these organizations have never received any federal funding in the past. As a result of this type and level of funding, you may be hearing two words you haven’t paid too much attention to in the past, Single Audit. A Single Audit is an organization-wide financial statement and federal awards' audit of a non-federal entity that expends $750,000 or more in federal funds in one year. Why is it called a Single Audit? Prior to 1984, each federal grant-making agency was required to carry out its own audit. The Single Audit Act of 1984 standardized audits for states, local and tribal governments. These audits are performed under what is known as the Uniform Guidance. The Uniform Guidance is the Office of Management and Budget Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards under 2 CFR Part 200 of the federal register.

In order to determine if your organization needs a Single Audit, you must determine the total dollar amount of federal awards and grants your organization has expended during the fiscal year. In the past, the organization may have received small grants from federal agencies, states, counties, local governments, or other organizations that included federal funding, but the amounts did not exceed the $750,000 Single Audit expenditure threshold. This year the funding provided under the various coronavirus relief programs may potentially trigger a Single Audit depending on the type and amount of funding.

The Paycheck Protection Loan Program (PPP), Employee Retention Credit Program, and Economic Injury Disaster Loan (EIDL) Emergency Advance are not subject to a Single Audit. Your auditor will, likely, perform additional procedures to audit these funds’ expenditures. Just to make it more confusing, while the EIDL Emergency Advance is not subject to a Single Audit, the EIDL loan portion is subject to a Single Audit. In addition, funding under the Provider Relief Fund, Coronavirus Relief Fund, and Educational Standardization Fund are all subject to a Single Audit.

How Does Your Organization Determine the Total Federal Amount Received and Expended Under a Grant Program?

If the funding comes directly from a federal agency like the Department of Health and Human Services (HHS) then the entire amount expended under the grant or award is considered federal dollars. If the funding is passed through from another source, then your organization should read through the award or grant agreement. If the funding contains any federal dollars, the grant should include a Catalogue of Federal Domestic Assistance number (CFDA#) and the percentage of federal dollars included in the award.

Once your Organization has Determined the Amount of Federal Funding, What is the Next Step?

The financial report required under the Uniform Guidance is the Schedule of Expenditures of Federal Awards (SEFA). The SEFA lists each federal program, funder, pass-through agency (if applicable), contract identification number, and the amount of expenditures under that program in the reporting period. Your auditor will be asking for this schedule to determine the federal programs that will be audited for compliance under the Uniform Guidance.

Why are the Results of Your Single Audit Important?

First of all, your results are public information as the Data Collection Form (DCF) is filed on a searchable public database. In addition, your funders get the report and a deficient audit can have negative consequences including paybacks, additional reporting, and suspension of current or future grants.

What are the Due Dates for Single Audits?

Single Audits must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report, or nine months after the end of the audit period. As you can imagine, the pandemic has affected this requirement but only for those organizations that received some form of COVID-19 funding.

What Else Should I Know About my Requirements as an Organization Related to Single Audits?

You are required to establish and maintain effective internal controls over federal awards. You must also comply with federal statutes, regulations, and terms of the award(s). As a result, you must also evaluate and monitor compliance with respect to these two areas and take prompt action if noncompliance is identified.

In the case where your federal fund expenditures involve purchases of goods or services, you need to make sure you have written procurement policies and procedures. There are certain standards for these procedures, so you’ll want to be sure your policies comply with the requirements. This will be an area to discuss with your auditor.

In conclusion, if you haven’t been discussing these programs and the various requirements with your auditor, now is the time. You should work with them to determine what effect this will have on your organization’s audit and financial statements. In addition, you will want to discuss what additional steps your organization needs to take to make sure you are in compliance with any additional requirements under the federal award programs. Your organization’s auditor may need to perform additional procedures that will take additional time during the annual audit and will, likely, incur additional costs. By communicating with the organization’s auditor, it will allow them to properly plan and keep you informed of any additional steps that need to be taken now and during the audit. Should you have any questions, you should contact our audit team today.

The information and advice we are providing for this matter relates to COVID-19 legislative relief measures. Because legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that could modify some of the advice and information provided to you, after the conclusion of our engagement. We, therefore, make no warranties, expressed or implied, on the services provided hereunder.