What Is a Single Audit and When Is It Required?

A single audit is a comprehensive, organization-wide examination for entities that receive federal financial assistance. It ensures accountability and compliance with federal regulations concerning the use of public funds. This audit consolidates multiple program-specific audits into one, streamlining the process for both the audited entity and the federal government. This approach helps confirm federal resources are managed responsibly and used as intended.

Understanding the Single Audit Mandate

A single audit represents a thorough review of an entity’s financial statements and its federal awards. This examination is called “single” because it encompasses all federal funds, grants, and awards an entity has received, establishing consistency. The requirement for these audits originates from federal law, specifically the Uniform Guidance (2 CFR Part 200). This guidance sets the standards for entities receiving federal financial assistance.

Non-federal entities, including state and local governments, Indian tribes, non-profit organizations, and colleges or universities, are subject to a single audit. The current requirement applies to those entities that expend $1,000,000 or more in federal awards during their fiscal year. This threshold increased from $750,000 for fiscal periods beginning on or after October 1, 2024, designed to lessen the audit burden on smaller entities and focus resources on larger awards. The expenditures can stem from direct federal funding or indirect funding passed through another non-federal entity.

The objectives of a single audit are to provide assurance to the federal government about appropriate use of federal funds. Auditors assess whether recipients are complying with the terms and conditions of those awards. This process helps identify instances of mismanagement, noncompliance, or potential fraud, waste, and abuse within federal programs. Single audits support improved stewardship over the federal financial assistance provided to these entities.

Core Elements of a Single Audit

A single audit involves three main components, each contributing to a comprehensive assessment of an entity’s financial management and compliance with federal requirements.

The first component is an audit of the entity’s overall financial statements. This part is conducted in accordance with Generally Accepted Government Auditing Standards (GAGAS), often referred to as the Yellow Book. This financial statement audit determines if the financial statements are presented fairly in all material respects.

The second component is the audit of federal awards, which focuses on compliance. This aspect tests the entity’s adherence to federal program requirements. The specific compliance requirements are outlined in the OMB Compliance Supplement, a resource that guides auditors in identifying material compliance areas for each program. A document for this part is the Schedule of Expenditures of Federal Awards (SEFA), listing all federal awards received and expended by the entity during the fiscal year. The SEFA helps auditors determine which federal programs are considered major and thus require detailed testing.

The third element involves evaluating internal control over compliance. Auditors assess the entity’s internal control systems to determine if they are adequately designed and operating effectively. This evaluation ensures reasonable assurance the entity is complying with the provisions of its federal awards.

Preparing for a Single Audit

Entities receiving federal funds have specific responsibilities to prepare for a single audit. Maintaining records for all federal awards is important, including grant agreements, expenditure documentation, and compliance records. This detailed record-keeping supports an efficient audit process. Identifying all federal awards received and expended during the fiscal year is important for preparing the Schedule of Expenditures of Federal Awards (SEFA). The SEFA must accurately reflect expenditures and reconcile with the entity’s trial balance.

Entities should familiarize themselves with the specific compliance requirements for each federal program they receive. This involves consulting the OMB Compliance Supplement, which guides on program-specific federal compliance requirements. Documented internal controls related to federal awards are necessary, and management must ensure these controls function as intended.

Selecting an independent auditor qualified to perform single audits is another responsibility of the auditee. The auditee must provide the necessary financial information, program data, and access to personnel and records to the auditor. Proactively addressing any concerns about compliance with federal programs before the audit begins can help prevent potential issues.

Single Audit Reporting and Outcomes

After the audit fieldwork concludes, specific deliverables and actions are required. The auditor issues various reports, including an opinion on the financial statements, a report on internal control over financial reporting, and a report on compliance and internal control over compliance with federal awards. These reports summarize the audit findings and conclusions.

A document issued is the Schedule of Findings and Questioned Costs (SFQC). This schedule details instances of non-compliance or control deficiencies, known as findings, and identifies questioned costs, expenditures that may not comply with federal requirements. For each finding, the SFQC provides specific information, including criteria, condition, cause, effect, and recommendation.

The audited entity is responsible for developing a Corrective Action Plan (CAP) in response to any audit findings. This plan outlines the steps the entity will take to address the identified issues. The CAP must be on official letterhead and signed by management, detailing how each finding will be resolved.

The completed single audit package, including the data collection form, audit reports, and the corrective action plan, must be submitted electronically to the Federal Audit Clearinghouse (FAC). This submission is due within the earlier of 30 days after receiving the auditor’s report or nine months after the end of the fiscal year being audited. Timely submission is important for continued eligibility for federal funding. Following submission, federal agencies may follow up on findings to ensure corrective actions are implemented.