What is included in a single audit?

Written by Krista A. Showers, CPA, MBA, CEBS

For those entities involved with Federal funding, the term “Single Audit” is often found in grant contracts. But not everyone is clear about what it means. This topic is also being brought up at seminars and in newsletters as there are many items about to change in the coming months.

Let’s start with the history (before December 26, 2014):

What it is?

• An entity-wide audit consisting of two main parts:
  • an audit of the financial statements
  • a compliance audit of the entity’s major federal award programs. Auditors are required to gain an understanding and test internal controls over compliance as well as test compliance with applicable compliance requirements for each major program.
• A single audit will be conducted annually
• Audit period will be the entity’s fiscal year
• Type A programs are defined as programs with expenditures > $300,000 (if total federal expenditures are < $10 million)
• Percentage of coverage rules are 50% and 25% of total federal expenditures based on entity’s status as not low-risk and low-risk auditee, respectively

Who is subject to a single audit?

• State and local governments
• Nonprofit organizations
• Each of these entities must spend greater than $500,000 in federal awards in a fiscal year

What are the reports included in a Single Audit

• Schedule of Expenditures of Federal Awards (SEFA)
• Report on controls and compliance of the entity
• Report on controls and compliance of major federal programs
• Schedule of Findings and Questioned Costs (known and likely questioned costs in excess of $10,000)
• Summary Schedule of Prior Audit Findings

What Changed on December 26, 2014?

What it is

• New Single Audit threshold is if the entity expends more than $750,000 in federal awards in a fiscal year.
• Type A Programs have new thresholds ($750,000 if <$10 million in federal expenditures)
• Percentage of coverage rules are now 40% and 20% for not low-risk and low-risk auditees, respectively

Reports included in a Single Audit

• Questioned costs are now defined as known and likely questioned costs in excess of $25,000

Other Changes

• Eight previously separate sets of Office of Management and Budget (OMB) guidance have been combined into one.
• In guidance, watch “should” which indicates best practices or recommended approaches versus “must” which indicates requirements.
• For a period of time, an entity may have awards under both old and new guidance and will need to pay attention to which rules apply.

For further questions on Single Audits, please reach out us by completing the form below or call 717-569-2900.

Examples of Single Audit in a sentence

• Brent York made the motion to approve the Single Audit Requirement Notification Form.

• In addition to meeting the requirements set forth in state statutes, the audit also was designed to meet the requirements of the Single Audit Act of 1997 and the related OMB Circular A-133 and State Treasury Circular Letter OMB 04-04.

• The audit must be conducted in accordance with auditing standards generally accepted in the U.S., Government Auditing Standards promulgated by the Comptroller General of the U.S.; the Single Audit Act Amendments of 1996 and the provisions of OMB Circular A-133.

• Information related to this Single Audit, including the auditor’s report on the internal control structure and compliance with applicable laws and regulations and findings and recommendations are included in the Single Audit section of this report.

• Copies of the City's audited Comprehensive Annual Financial Report, Single Audit Report and Management Letter for June 30, 2013 and for prior years may be down loaded from the City’s web-site at http://www.newtonma.gov/gov/comptroller/audrep.asp.

More Definitions of Single Audit

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The single audit. This term may be unfamiliar to you if you are new to grants management, but the single audit is a necessary part of effective grants management for many federal grant recipients. Audits are important because they promote accountability. Here are 10 FAQs to help you better understand this important process.

10 Single Audit FAQs

1. What is a single audit?

Most simply put, it is a review of the way in which your organization has managed a grant to make sure that you are in compliance with all the rules and regulations of each grant award. Required components of an audit include such things as financial statements and records, expenditures, and internal controls.

2. Why is it called a “single” audit?

Before 1984, each federal grantmaking agency was required to carry out its own audit.  The Single Audit Act of 1984 standardized audits for states, local and tribal governments. However, because each grant has its own unique requirements, no two audits are exactly the same. Think of it as a car maintenance check. The mechanic might have the same procedure to check the all the parts under the hood, but what services are performed will vary according to your car’s own individual specifications.

3. Which government office is responsible for setting the rules and regulations for federal audits?

The Office of Management and Budget sets rules and regulations. The audits themselves are conducted by independent private accounting firms hired by auditees, like Native American tribes, state and local governments.

4. Have their been other major changes to federal audits since 1984?

Yes. 2 CFR 200, also known as the Uniform Guidance, which went into effect December 26, 2014, was meant to simplify federal rules and regulations regarding grant management and make everything more efficient. You may still run across the terms Circular A-133 or OMB A-133 audit. Those were the old guidelines which the Uniform Guidance replaced.

5. Do all recipients of federal grants get audited?

There are different routes to an audit. One test is to see the entity requires a risk assessment.  Grantees who expended more than $750,000 in federal dollars in any one year are considered Type A program and will need a risk assessment to see if an audit is required. If they are under the $750,000 threshold they are considered Type B programs. Although there are circumstances where Type B programs do get audited, they do not automatically need a risk assessment.

6. What is a risk assessment? 

A risk assessment in the next stage in considering who will be audited. A determination is made to put an entity in either a high or low risk category. An entity is high risk if they have not been audited as a major program in the last two years and what the findings of their previous audits were.

7. Do only high risk Type A programs get audited?

No. Any federal grant recipient has the potential to be audited. It is also important to remember that Single Audits pertains to the federal audit requirements in Uniform Guidance.  The individual grantmaking agency may also request audits on grantees, specific awards or programs.

8. What other considerations beside financial elements do the auditors consider?

There are two types of things auditors look at. The financial part, to see if your books are in order. The second is the programmatic part – how well your program is meeting its goals and objectives.

9. Are the results of the audits made public? 

Yes. The exception is Native American tribes who are not required to make the audit report public, although the data collection phase will still be publicly available.

10. What are some consequences of an unsuccessful audit?

There are many negative consequences that may result from an audit with a high number of violations. They range from the grantee having to pay back disallowed costs to suspension of the grant altogether. An entity may also end up in the high-risk category, which increases the risk of additional audits. It may even impact the organization’s ability to win future awards. As “The Federal Grant Insider”  Lucy Morgan puts it, “the future of grants funding will increasingly go to organizations with clean audits.”

eCivis is the nation’s leading grants management software solution and the ideal platform for improving grants performance for local governments and community-based organizations.

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