- Nonfederal entities that have expended federal funds of $750,000 or more during the fiscal year are required to have a single audit performed on those funds.
- If funds are not used in accordance with the intended purpose and within the laws and regulations of the federal agency, the federal government could require the funds to be paid back.
- If your organization meets the threshold for a single audit, be aware of which documentation and support to prepare in advance for the auditor.
Learn how to prepare for a single audit.
Many organizations have received dollars from federal government relief acts and programs such as:
- CARES (Coronavirus Aid, Relief and Economic Security Act)
- CRRSAA (Coronavirus Response and Relief Supplemental Appropriations Act)
- ARPA (American Rescue Plan Act)
- CSLFRF (Coronavirus State and Local Fiscal Recovery Funds)
- SVOG (Shuttered Venue Operators Grant)
- PRF (Provider Relief Funds)
With so many acronyms and different types of funding floating around, organizations may feel overwhelmed and — especially for those receiving federal funding for the first time — unsure of the exact compliance requirements.
Learning the nuances of these programs and requirements on the fly — even while information on administration, compliance, and reporting requirements was developing and changing — has been challenging for recipients and auditors alike. Reviewing some facts and guidelines may bring focus and better understanding of responsibilities.
Requirements under a single audit
When is a single audit required?
Subject to OMB Uniform Guidance in CFR Part 200, nonfederal entities that have expended federal funds of $750,000 or more during the fiscal year are required to have a single audit performed on those funds. Additionally, some federal programs, such as PRF, have distinct requirements for when funding counts toward this threshold, based on timing of reporting versus expenditures.
How do you know if the funds you received are federal funds? The awarding agency should provide details and an assistance listing number (ALN), which identifies which federal program the funds fall under. If the grant award does not specifically state whether the funds are federal, contact the funder to clarify the source.
Nonfederal entities that receive federal funds are required to prepare a Schedule of Expenditures of Federal Awards (SEFA), which includes the federal agency providing the funds, the pass-through entity (if any), federal award identification, and federal expenditures incurred by the ALN. The SEFA will include all federal awards expended for the period covered by the nonfederal entity’s financial statements.
Policies and internal controls
Federal regulators are looking for assurance that nonfederal entities are managing the federal funds according to laws, regulations, and various provisions of the grant award, agreement, and contract. They also want to see that nonfederal entities have adequate internal controls over compliance in place.
When a single audit becomes applicable, an auditor performs procedures on the nonfederal entity’s compliance with specific requirements — along with testing the internal controls over those compliance requirements. A wide range of additional policies, procedures, and controls need to be in place to be compliant with Uniform Guidance. If the funds are not used in accordance with the intended purpose and within the laws and regulations of the federal agency, the federal government could require the funds to be paid back.
Since federal funds are so heavily regulated, organizations need to have:
- Appropriate financial management systems to identify all federal awards received, track source and application of federal awards, and maintain source documentation
- A policy over allowability of costs
- A procurement policy and/or conflict of interest policy
- A policy over cash management
- Other policies/procedures specific to the federal award
Single audit preparation
If an organization meets the threshold for a single audit, the auditor is likely to request certain documents. When preparing for the single audit, keep these guidelines in mind:
- Retain all grant agreements and contracts
- Prepare a SEFA
- Read the agreements and understand all the compliance requirements within the grant
- Retain support for all reporting requirements detailing out how the requirement has been met
- Retain support for all expenditures applied to the grant and summarize in a listing for the auditors
- Retain and have available all policies and procedures detailed above
- Document internal controls in place over compliance requirements
Once the single audit has been performed and completed, the nonfederal entity must submit the single audit reporting package, which includes the audited financial statements and applicable single audit reports, corrective action plan for current year findings, and a schedule of prior-year findings.
For nonprofits and governments, the reporting package is submitted to the Federal Audit Clearinghouse, due 30 days after the report was received but no later than nine months after the nonfederal entity’s year-end. For-profit organizations have differing requirements by federal agency on submittals.
The federal government disbursing a large array of COVID relief funds in a short amount of time has resulted in a delay in guidance for some programs, many frequently asked question documents, and ongoing changes regarding compliance. Nonfederal entities can work with an advisor for help understanding what type of funding they have received and which requirements are attached to those funds.
How we can help
CLA’s federal grant compliance professionals are here to be a resource to you. We can help you navigate grant questions, provide guidance on federal grant compliance, and assist with performing single audits.
For additional information regarding COVID relief funds, see the following webinars: