Managing a non-profit on an average day can be challenging enough. Raising funds, managing volunteers, and actually doing the work you’re there to do demands every ounce of your energy.
Then there are days that can really test your resolve…days when someone mentions the word “audit.”
Specifically, if you operate a non-profit that relies on a significant amount of money from the U.S. federal government to do business, you are very likely to need a Single Audit done. In this post, we will help explain:
- What a Single Audit is
- The requirements and guidelines
- The difference between a single audit and a regular audit
- The difference between a performance audit and a financial audit
- How a Single Audit can actually make your organization better
What Is A Single Audit?
A Single Audit is a financial and operational examination of an organization that receives and spends federal financial assistance. Federal assistance is defined by the U.S. government as: “assistance that non-Federal entities receive or administer in the form of
- Cooperative agreements;
- Non-cash contributions or donations of property (including donated surplus property);
- Direct appropriations;
- Food commodities; and
- Other financial assistance.”
It also can include awards, loans, loan guarantees, interest subsidies; and insurance. It does not include, however, money taken as repayment for services rendered to people.
Originally, the U.S. government depended on separate audits for all of the various federal assistance programs that it funds in order to make sure federal money was being managed well by responsible organizations. But when a nation hands out over $400 billion annually through multiple agencies that each oversee hundreds of recipients…it can get complicated.
That’s why, in 1984, the Single Audit Act was created. It simplified and standardized the process for all States, local governments, Indian tribes, non-profit organizations, and other individuals who benefit from federal dollars in order to fund their activities.
During a Single Audit, a certified CPA looks at the receiving organization’s financial records, usage of federal assistance, how its operations are managed, and internal control systems.
Federal Single Audit Threshold
Not every organization that receives federal funds has to go through an annual Single Audit, though. The government only requires it if you accept and expend $750,000 or more federal funds. These funds qualify whether they come from the federal government directly or pass through another entity first.
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Single Audit Requirements
The National Council of Nonprofits has a helpful article on this topic that breaks down federal law audit requirements. In it, they include a chart that explains how to determine when each type of federal assistance is expended, so you can determine whether or not it applies to requirements for a Single Audit.
|Type of Federal Assistance Received||Basis for Deciding When Expended|
|Grants, cost-reimbursement agreements, cooperative agreements, and direct appropriations||When the money is spent|
|Loans||When the loan proceeds are utilized|
|Donated property||When the property is accepted|
|Food items||When the food is distributed or consumed|
|Interest subsidies||When amounts are disbursed entitling the entity to an interest subsidy|
|Insurance||When the insurance is in effect|
Single Audit Guidelines
Auditors are responsible for following guidelines set forth by the Office of Management and Budget (OMB) and the current Uniform Administrative Requirements, Cost Principles, and Audit Requirements (commonly referred to as “The Uniform Guidance”). The specific section that relates to Audits is known as Subpart F. This is the document that consolidates 8 previous OMB circulars into one standardized set of rules for all non-federal entities. They must also agree to follow all Generally Accepted Government Auditing Standards (GAGAS).
Single Audit vs Regular Audit
A Single Audit is substantially more thorough than a regular independent audit that any organization may undergo. Single Audits go into much more detail and cover the entire scope of the non-federal entity’s organizational management.
In addition to examining financial records the same way a regular audit does, a Single Audit examines internal control systems and makes sure the organization is complying with all government regulations that apply.
Performance Audit vs Financial Audit
There are two aspects to a Single Audit: Financial and Performance. The goal is to not only make sure the organization is handling money well but that its day-to-day operations are being managed effectively to ensure that federal assistance is being used in the most responsible way possible.
A financial audit is exactly what it sounds like: examining the financial records of an entity. According to Investopedia, “A performance audit is an independent assessment of an entity’s operations to determine if specific programs or functions are working as intended to achieve stated goals.” Determining this involves more than just looking at the books and financial reports.
Performance audits are much more involved and take longer than financial audits. However, the findings are much more useful to organizations as they can help them discover areas that need improving, increase productivity and efficiency, reduce costs, and improve decision-making processes.
A performance audit (or any audit, really) involves the following steps:
- Receive the Assignment
- Gather Information About the Organization
- Set Objective Criteria for the Audit
- Review Risk Assessments and Internal Controls
- Prepare a Detailed Plan Report
- Field Work
- Follow the Plan
- Document Tests and Results
- Make Observations
- Make Recommendations
- Draft a Report Based on Findings
- Deliver a Final Report
- Follow-up On Corrective Actions Needed
Trust Experienced Auditors to Guide You Through the Process
If you are a non-federal entity needing to have a Single Audit performed because you receive (and spend) $750,000 or more in federal government assistance, it can be an extremely stressful process.
We’ve performed hundreds of audits in the 40+ years that we’ve been in business, and we understand the anxiety that having someone examine your organization can cause.
That’s why our team strives to go above and beyond to make sure that our financial audits and compliance services are as painless as possible. We believe you deserve to have a fair and honest assessment of how you’re doing. And we know how valuable the feedback from audits like these can be…when they’re done properly.
To find out what it’s like to expect more from your CPA, schedule a call today. We’d love to help!