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Single Audit Prep 101, Part 1: Key Considerations when Preparing for a Single Audit
If your government or nonprofit organization has received federal funding in response to the COVID-19 pandemic, such as the Coronavirus Relief Fund established by the Coronavirus Aid, Relief, and Economic Security Act, you may be required to have a Single Audit performed. For organizations that haven’t received significant federal financial assistance before, preparing for a Single Audit can be a little overwhelming—but it doesn’t have to be.
This article addresses some questions you may have about preparing for a Single Audit.
What is a Single Audit?
In short, a Single Audit is an organizationwide financial and compliance audit. In addition to providing an opinion on the financial statements, a Single Audit report includes reports on the Schedule of Expenditures of Federal Awards (SEFA), internal control over financial reporting, and compliance and internal control over compliance.
Single Audits are currently implemented by Uniform Guidance, which is issued and maintained by the Office of Management and Budget (OMB). Uniform Guidance contains uniform cost principles and audit requirements for federal awards and administrative requirements for all federal grants and cooperative agreements. The OMB also issues a Compliance Supplement annually as comprehensive and authoritative guidance for Single Audits. The Compliance Supplement addresses compliance requirements of federal awards overall and establishes the compliance requirements that are subject to audit for certain federal programs. It’s a good source to find what an auditor will be looking at during your Single Audit.
Is my organization required to have a Single Audit?
Not all federal awards are subject to Single Audit. For example, while the majority of COVID-19-related funds are subject to Single Audit, one major program—the Paycheck Protection Program—isn’t subject to Single Audit. To determine if your organization is required to have a Single Audit, you must first identify the federal awards received that are subject to Single Audit. Federal awards include not only those received directly from a federal awarding agency but also those indirectly received from a pass-through entity (as a subrecipient). Once you’ve identified the federal awards your organization has received, you must quantify the amount of those federal awards that was expended during your fiscal period. The term “expended” is based on when the activity related to the federal award occurs, which includes disbursing funds to subrecipients. According to the Uniform Guidance, a Single Audit is required “when a non-federal entity expends $750,000 or more of federal awards (either direct or indirect awards) in their fiscal year” (Section 200.501(b)).
Reviewing the grant agreement and performing a search of the program on www.beta.sam.gov can help you determine if funds you received are subject to a Single Audit. You also can find information at www.grants.gov. However, it’s important to verify requirements with the awarding agency.
How do I prepare for a Single Audit?
While we can’t cover everything an auditee can do to prepare for a Single Audit in this article, here are a few tips to get you started:
- Gather and summarize federal grant information – This includes grant award documentation and the CFDA number for each federal award.
- Create a detailed draft of the SEFA – It’s crucial that your SEFA is put together as accurately as possible prior to the audit. Auditors are required to analyze the programs reported on the SEFA to determine which programs are “major” and will be tested in the audit.
- Review written policies and procedures – Pay particular attention to allowability of costs, cash management, procurement, and subrecipient monitoring policies. For example, you may have procurement policies in place that aren’t compliant with the federal award thresholds outlined in the Uniform Guidance. It’s important to address these types of issues before the audit is performed.
- Gather financial records – These need to include expenditure justification, as well as financial and performance reports.
- Perform a self-check on compliance requirements – Ensure no expenditures are reimbursed by more than one federal funding source. Be mindful of reclassification of costs between programs. Check that applicable credits are netted against expenditures.
How can BKD help?
According to data compiled by the OMB via the Federal Audit Clearinghouse, BKD is a leading provider of Single Audits among CPA firms. Whether you’re preparing for your first Single Audit or you’ve had Single Audits for years, our trusted advisors can help you navigate the Uniform Guidance regulations and compliance requirements, develop internal controls, and gather the necessary information that will help your Single Audit go more smoothly.
As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. Reach out to your BKD Trusted Advisor™ or submit the Contact Us form below if you have questions.