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Companies and organizations receiving federal funding face increasing scrutiny to ensure proper management and compliance. For U.S. nonprofits, tribal entities, and government contractors, meeting Single Audit requirements is crucial to show accountability and maintain eligibility for future federal awards.
The Single Audit, overseen by the Office of Management and Budget’s Uniform Guidance, offers a standardized way to audit financial statements alongside federal award compliance. Starting in fiscal year 2025, the audit threshold rises from $750,000 to $1,000,000, affecting which organizations must undergo this thorough review.
This blog guides you through what a Single Audit involves, explains the updated requirements, highlights common compliance challenges, and provides practical advice to help you prepare for a successful audit.
A Single Audit, sometimes called a Uniform Guidance audit, is a comprehensive examination of an organization's financial statements and compliance with federal award requirements. It applies to non-federal entities receiving and expending federal funds and ensures accountability for how those funds are used.
Governed by the Office of Management and Budget (OMB) through the Uniform Guidance (2 CFR Part 200 Subpart F), the Single Audit combines a financial statement audit with a detailed review of compliance for major federal programs. This includes testing internal controls, verifying expenditures, and assessing adherence to regulations.
Understanding Single Audit requirements is essential for organizations to maintain federal funding eligibility and comply with U.S. government standards.
Now that you know what a Single Audit is, let's explore the single audit process.
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The Single Audit follows a structured process that ensures organizations meet federal financial and compliance requirements thoroughly. Understanding these steps can help organizations prepare effectively.
This involves gathering all federal grant documentation, preparing financial statements, and creating the Schedule of Expenditures of Federal Awards (SEFA). Auditors also assess organizational controls and set audit scope and timelines.
Auditors review financial records, evaluate internal controls over federal funds, and test compliance with program-specific requirements such as allowable costs, procurement rules, and reporting. Sampling techniques and interviews help assess risk and compliance.
A Single Audit Report is prepared, including financial statements, SEFA, auditor opinions on compliance, and any findings or questioned costs. This report must be submitted to the Federal Audit Clearinghouse within regulatory deadlines.
If audit findings arise, the organization must develop and implement a Corrective Action Plan (CAP). Ongoing monitoring ensures issues are resolved to maintain federal funding eligibility.
Now that you know how the Single Audit process works, let’s look at some common problems organizations face during their audits.
Also Read: Understanding Company Audits: Key Processes and Types
During Single Audits, several issues frequently arise that organizations should be aware of to stay compliant and avoid costly problems.
Many organizations miss federal awards originating from state grants or other sources and exclude them from the Schedule of Expenditures of Federal Awards (SEFA). This leads to incomplete reporting and potential material weaknesses in audit findings.
Failure to submit performance and compliance reports on time or submitting reports with errors can result in significant audit findings and jeopardize continued federal funding.
Deficiencies often appear in control design or execution over financial reporting, eligibility verification, and compliance monitoring. These weaknesses can expose organizations to misstatements and compliance risks.
Organizations sometimes charge costs that are unallowable, unsupported, or improperly allocated, especially payroll and indirect costs, leading to questioned costs and audit findings.
Not appropriately monitoring or assessing risk in subrecipients, failing to verify unique entity identifiers (UEI), and not performing timely risk assessments are common problems that affect compliance.
Audit findings often reveal noncompliance with procurement standards, including sole-source justifications, vendor suspension checks, lack of written policies, or poor documentation supporting procurement decisions.
Preparing for a Single Audit can seem overwhelming, but careful planning and organization make all the difference. By following best practices and staying proactive, your organization can manage the process smoothly and reduce the risk of audit findings.
Collect complete details of all federal awards your organization received during the fiscal year, including direct awards and pass-through funding. Accurate records ensure your Schedule of Expenditures of Federal Awards (SEFA) is complete.
Ensure your financial statements are updated, accurate, and prepared according to Generally Accepted Accounting Principles (GAAP). Include all necessary notes and disclosures for transparency.
Create a precise SEFA that aligns with your financial records and clearly lists all federal grants, with award numbers and expenditure amounts.
Assess your organization's internal controls related to federal award management, including segregation of duties, authorization processes, and recordkeeping. Update policies where gaps exist.
Gather supporting documents such as grant agreements, invoices, timesheets, procurement records, and reports. Maintain organized, accessible files to provide auditors with clear evidence.
Clarify audit scope, deadlines, and expectations in advance. Discuss any new awards or changes in processes to help auditors plan effectively.
Review previous Single Audit reports and ensure corrective actions have been implemented. Prepare documentation demonstrating progress on past recommendations.
Educate personnel involved with federal awards on compliance policies and audit processes. Encourage open communication to resolve questions before the audit begins.
If findings arise during the audit, have a process ready to address and document corrective actions promptly to maintain compliance and funder confidence.
Also Read: Understanding US GAAP Revenue Recognition Standards
VJM Global provides expert Single Audit support that helps U.S. businesses and CPA firms meet federal compliance efficiently. With knowledge of Indian regulations and U.S. standards, they prepare your financial records for audit and minimize risks.
By handling these critical tasks, VJM Global helps you meet Single Audit requirements smoothly and efficiently. Request a call back now to get started with expert Single Audit assistance tailored for your needs.
A Single Audit is a comprehensive financial and compliance review required for organizations that spend $750,000 or more in federal funds annually. It evaluates your financial statements, internal controls, and compliance with federal program requirements.
Any non-federal entity or organization receiving and spending federal awards over the specified threshold must undergo a Single Audit according to federal regulations.
VJM Global prepares your financial records, reviews internal controls, and provides offshore audit support to help ensure your audit is well-organized, accurate, and timely.
Key documents include your financial statements, Schedule of Expenditures of Federal Awards (SEFA), grant agreements, payroll records, and procurement files. VJM Global guides you on collecting and organizing these efficiently.
The timeline varies based on complexity, but with VJM Global’s support, preparation time is optimized to meet federal deadlines without last-minute pressure.
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