If your not for profit organization receives federal funding, you may be subject to Single Audit requirements under the Office of Management and Budget’s Uniform Guidance. Such organizations are required to conduct Single Audits when they expend $750,000 or more on federal assistance for the fiscal year.
A Single Audit consists of a normal audit of your financial statements and an audit of compliance over major federal programs. Such audits are intended to provide assurance to the federal government that a nonfederal entity has adequate internal controls in place and is generally in compliance with program requirements. Here are some helpful considerations to keep in mind:
Is a Single Audit Required?
First, identify every source of revenue your organization has, and earmark those that come from federal sources. One caution: you’ll need to track federal expenditures and not necessarily the revenue amounts. However, most federal grants are on a cost-reimbursement basis, in which the revenue and expenditures equal each other, so federal revenues are a good starting point.
Once you have identified all federal sources, total the federal expenditures. You only need to provide a Single Audit if such expenditures exceed $750,000 for the fiscal year. Read on for more information about how the process works, including the documents you’ll need to file.
Schedule of Expenditures of Federal Awards
The SEFA is the starting point for your auditor and for the entire process. This document, which will ultimately be filed as part of the Single Audit, lists the federal expenditures you have received money from. You are responsible for preparing it and for ensuring your organization has proper internal controls in place to ensure that it’s complete and accurate.
A SEFA must identify the grantor, pass-through agencies, Catalog of Federal Direct Assistance (CFDA) numbers, and federal expenditures. (The CFDA numbers for each program are usually found in the grant agreements or the notice of grant award letters.)
Overall Responsibility of Management for Federal Programs
Management is responsible for establishing and maintaining effective internal control over compliance for federal programs. The controls must provide reasonable assurance that the nonprofit is managing federal awards and subawards in compliance with federal statutes, regulations, and the terms and conditions of federal awards and subawards that could have a material effect on its financial programs. Your auditor will discuss the internal control processes with you, and document and test those controls.
Understanding Compliance Requirements and the OMB Compliance Supplement
It is essential to know about the federal programs you have received funding for, and the applicable compliance requirements for each grant. The term and conditions of your grant agreement should describe your requirements as the recipient of the grant. There is normally a contact from the grantor agency assigned to your organization who can help identify and explain the applicable compliance requirements of your grant. An additional resource to identify the compliance requirements is the OMB Compliance Supplement, available from both the federal government and the AICPA.
Part 2 of the Compliance Supplement contains a matrix that identifies the compliance requirements applicable to audit requirements. Part 3 identifies all compliance requirements. Part 4 contains the compliance requirements for each specific federal program by CFDA number. If your program is not listed in the supplement, your grant agreement and its terms and conditions should be used to determine which compliance requirements are applicable to your program.
Management is responsible for identifying which costs are allowable for federal awards. Use the Uniform Guidance (section 200.420 – 200.475) to identify such costs. A cost must be necessary and reasonable for the award to be allowable. Budgets, which are normally approved by your awarding agency, are a good source for identifying allowable costs and activities for your program.
If your organization has any sub-recipients to which you pass-through the federal funds, your organization is responsible for monitoring the sub-recipient to ensure it follows all requirements of the program. Be sure to maintain documentation of monitoring performed (such as site visits and reviews of sub-recipient financial statements), as your auditor will need evidence the monitoring was performed.
Prepping Your SEFA and Other Documentation
Submit your SEFA to your auditor as soon as you can: this will help the audit run more smoothly. Your auditor will then review the SEFA to determine which major programs should be tested, so the sooner such programs are identified, the better. (There is a required rotation of major programs for testing, so you may see different federal programs tested each year you have to have a Single Audit.)
Have copies of grant agreements, notice of grant award letters, and budgets available. Any budget narratives detailing specific costs for each budget line item will be very helpful for your auditor.
Each federal program must be accounted for separately. Your auditor will therefore need the general ledger detail for each program to audit the accounting for the programs.
Copies of reimbursement requests and advance funding requests from the granting agency will also be needed for the audit. Have on-hand bank statements and other documentation to show when the federal funds were received. Copies of any financial reports that are required to be submitted to the federal agency will also be needed. Your auditor will need to test the supporting documentation for the reports to ensure the reports are complete and accurate.
Also have available copies of vendor invoices and payroll records (e.g., timesheets and time and effort certifications) to support the federal expenditures.
Filing Your Audit
The deadline for submitting your audit to the Federal Audit Clearinghouse (FAC) is 30 days after receipt of the auditor’s report or within 9 months after your fiscal year-end, whichever comes first.
Your auditor will help with this. It will initiate the Data Collection Form (DCF) on the FAC website, and the responsible individual at your organization must then review and certify the DCF and reporting package.
Once your organization’s certification is completed, your auditor will submit the DCF and reporting package to the FAC for approval. Once the FAC approves, you are done!
How Holtzman Can Help
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