If you’re not yet familiar with single-audit, it’s possible that your business or organization hasn’t yet navigated the complex terrain of substantial federal funding subject to Uniform Guidance. With the expansion of federal support due to various spending priorities, an increasing number of entities, beyond not-for-profits (NFPs), are finding themselves required to undertake a single audit. For any organization involved with federal awards, grasping the intricacies of single audit requirements and preparation becomes crucial.
The aim of a single audit is to assess an organization’s adherence to the specific conditions of a federal award program(s), as stipulated by the 2 Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). A single audit not only includes a compliance audit but also necessitates an audit of the organization’s financial statements for the corresponding period. This dual audit process culminates in a comprehensive report that is submitted electronically to the federal government via the Federal Audit Clearinghouse.
Determining Single Audit Necessity
An organization needs a single audit if it spends $750,000 or more in federal awards during its fiscal year. It’s vital to note that this threshold is based on actual expenditures within the fiscal year, rather than the total amount of awards received. Identifying which awards fall under Uniform Guidance is critical for determining the need for a single audit.
Engagement with the funding agency to clarify the application of Uniform Guidance is also important. Award agreements often explicitly state the audit requirements, including a reference to an “Assistance Listing Number” (ALN), indicating the award’s cataloging by the federal government and its potential audit eligibility.
Organizations must carefully track and record eligible expenditures for each federal program, considering the complexity of certain awards and costs. Early consultation with Cabrillo Compliance experts can help navigate these complexities, ensuring comprehensive expenditure documentation.
Industry-Wide Responsibilities in Federal Award Compliance
Accepting federal awards brings about significant compliance responsibilities for any organization. This includes establishing robust internal control systems tailored to each federal award, with clear written policies and procedures on procurement, cash management, and allowable costs, among others. Documenting these control activities is vital for audit purposes.
Effective cost accounting is essential, with distinct account numbers for each federal award facilitating accurate tracking and compliance. Organizing and maintaining detailed information on expenditures, reimbursement claims, and communications with funding agencies streamlines the audit process.
Selecting an Auditor and Audit Expectations
The choice of a qualified auditor is critical, with procurement processes aligning with Uniform Guidance standards. The selection process should consider the auditor’s qualifications, experience, availability, and history of quality control, as recommended by resources such as the American Institute of Certified Public Accountants (AICPA) Governmental Audit Quality Center.
Not all federal awards undergo the same level of audit scrutiny. Auditors apply a risk-based approach to decide which programs require auditing, performing control tests and compliance checks according to OMB’s annual Compliance Supplement.
Adapting to Evolving Single Audit Regulations
With the growth of federally funded programs and evolving regulations, entities across various sectors may increasingly require single audits. While federal funding offers opportunities, it also demands rigorous internal control and compliance efforts. Strategic planning, tailored controls, and compliance strategies are essential to mitigate audit risks, ensuring the effective management and utilization of funding for the intended beneficiaries and communities.
For more detailed information or assistance with single audits, consulting Cabrillo Compliance specialists can provide tailored support and guidance for your organization.
