Undergoing a Single Audit for the First Time? Here’s What You Need to Know

The Coronavirus Aid, Relief, and Economic Security (CARES) Act and American Rescue Plan Act (ARPA) have led to many non-profit organizations, state and local governments and higher education institutions receiving federal funding. This new source of funding could qualify as federal awards under Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance). If these non-federal entities expend more than $750,000 in federal awards during one fiscal year, they are subject to Single Audit requirements under the Uniform Guidance. Many organizations in the non-profit, education and government sectors are working through the Single Audit process for the first time and navigating unchartered territory.

The Board of Directors’ role in this process is vital to ensuring the organization is using resources effectively, taking on projects it can manage and fulfilling both the organizational mission and compliance requirements. A knowledgeable, engaged and effective Board can make a difference in whether or not an organization can keep grant funding. While the Board should not be involved with day-to-day compliance, it has the responsibility at the entity level of making sure the organization has the resources and oversight to achieve compliance.

DHG has provided Single Audits to a variety of clients over the years, including healthcare organizations recently receiving CARES Act grants as well as many other federal programs. Our Single Audit professionals have outlined helpful tips for management teams and Boards of Directors to reference as their institutions proceed with a first-time Single Audit.

The Single Audit Process in Brief

Single Audits typically follow a four-step process as outlined by the AICPA: 1) Determine the need for a Single Audit, 2) Select the major programs, 3) Test internal controls and compliance and 4) Provide reporting.

The need for a Single Audit and whether an institution meets the criteria is based on the Schedule of Expenditures of Federal Awards (SEFA), filled out by the organization (more on this below in Tip #1). One of the primary purposes of the Single Audit’s assessment of an organization’s internal control is to “provide reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award.” In selecting programs to test by risk level, auditors use Uniform Guidance criteria (see Tip #2) and judgment from their experience conducting these audits. The final deliverables from a Single Audit include a reporting package with the SEFA, Yellow Book report, single audit compliance opinion, schedule of findings and questioned costs and corrective action plan, if applicable, among other documents.

Tips for a Successful First-Time Single Audit
Tip #1: Understand the Funding Received

Organizations will need to complete the SEFA, the schedule detailing all federal awards they received. While this can be a time-consuming process in the first year, it is vital to an effective Single Audit. In understanding your funding, organizations should know the answers to the following and keep them top-of-mind throughout the process:

  • Who is the awarding agency contact? (including contact information for questions)
  • What are the restrictions on spending?
  • How will our spending be tracked?
Tip #2: Know the Players

Understanding the agencies involved in the Single Audit process is key. Single Audits include an annual financial statement audit under AICPA standards and Government Auditing Standards (or Yellow Book standards) as well as an annual compliance audit under AICPA standards and Office of Management and Budget (OMB) Uniform Guidance, a framework for managing grants. The Government Accountability Office (GAO) is responsible for issuing Yellow Book Standards. The OMB issues and maintains Single Audit regulations and coordinates with federal grant-making agencies. Single Audits must be submitted to the Federal Audit Clearinghouse, which operates on behalf of the OMB.

Yellow Book standards address compliance with laws and regulations that have direct and material effects on the financial statements and controls surrounding financial reporting. OMB Uniform Guidance requires both documentation surrounding internal controls over compliance and documentation on compliance requirements. The Compliance Supplement section of the Uniform Guidance is particularly important as it identifies existing compliance requirements that the federal government will want to see audited as part of an organization’s Single Audit.

Tip #3: Nail the Planning Process

As with a traditional audit, the planning stage of a Single Audit is critical. Discuss your federal programs with your auditor early in the process and the auditor will help collaboratively determine the testing approach that will be used and lay out documentation requirements. Documentation is more intense for a Single Audit than a traditional audit.

Tip #4: Designate a Single Audit Go-To Contact Person

The individual you select as the point-person is ultimately responsible for the Single Audit, should be knowledgeable of the requirements and will be the liaison between the organization and the auditor.


For more information about first-time Single Audits or questions about their impact to your organization, please reach out to us at nonprofit@dhg.com.

ABOUT THE AUTHORS

Mark Nicolas
Managing Partner, Non-profit, Education & Government
Mark.Nicolas@dhg.com

Sabrina Preston
Senior Manager, Assurance Services

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