GETTING READY FOR A SINGLE AUDIT
Over the past two years, organizations have received new or additional federal funding in response to the pandemic. Some organizations are subject to their first Single Audit, which accompanies a financial statement audit and ensures the organization is in compliance with the Uniform Guidance and specific grant requirements.The single audit process can be complex and overwhelming. To help avoid findings or missed deadlines that could affect your funding, consider these suggestions:
Funding Requirements: There are two layers of requirements. The first comes directly from the federal awarding agency. The second is communicated by the OMB in the annual Compliance Supplement. This document applies to all federal awards.
Internal Controls: Organizations are required to establish and maintain internal controls over financial reporting and over compliance with federal statutes, regulations and terms and conditions of the federal awards. Your auditor is required to understand and test the effectiveness for each compliance requirement applicable to your award. Be proactive and assess your controls to ensure they are designed to address the requirements of your award.
Documentation: Documentation with a Single Audit is imperative. You must be able to substantiate all payments, contracts, payroll, etc. funded with federal dollars. Your auditor must have a “paper trail” to follow, and it is your responsibility to prove these costs were necessary, reasonable, allowable and allocable. Be sure you document when you perform control procedures. Your auditor will test these controls to validate the procedures were performed.
Subrecipient: Often there is confusion when federal funds flow down from a federal agency to a local government or other organization. You must determine the source of your funding and if it is considered federal pass-through money. A subcontractor may provide goods or services to carry out the program but are not considered federal awards. Subrecipients carry out part of the program and are subject to all compliance requirements. If you pass a portion of your funding to another organization, creating a subrecipient relationship, then you are the pass-through entity and take on a hefty monitoring responsibility. You are responsible for compliance and do not get to “pass through” those requirements.
Experienced Auditor: Single Audits can be complicated. CPAs who perform them are required to have additional training each year. Auditors with extensive Single Audit experience can provide advice as you prepare and go through the audit.
Internal Controls: Organizations are required to establish and maintain internal controls over financial reporting and over compliance with federal statutes, regulations and terms and conditions of the federal awards. Your auditor is required to understand and test the effectiveness for each compliance requirement applicable to your award. Be proactive and assess your controls to ensure they are designed to address the requirements of your award.
Documentation: Documentation with a Single Audit is imperative. You must be able to substantiate all payments, contracts, payroll, etc. funded with federal dollars. Your auditor must have a “paper trail” to follow, and it is your responsibility to prove these costs were necessary, reasonable, allowable and allocable. Be sure you document when you perform control procedures. Your auditor will test these controls to validate the procedures were performed.
Subrecipient: Often there is confusion when federal funds flow down from a federal agency to a local government or other organization. You must determine the source of your funding and if it is considered federal pass-through money. A subcontractor may provide goods or services to carry out the program but are not considered federal awards. Subrecipients carry out part of the program and are subject to all compliance requirements. If you pass a portion of your funding to another organization, creating a subrecipient relationship, then you are the pass-through entity and take on a hefty monitoring responsibility. You are responsible for compliance and do not get to “pass through” those requirements.
Experienced Auditor: Single Audits can be complicated. CPAs who perform them are required to have additional training each year. Auditors with extensive Single Audit experience can provide advice as you prepare and go through the audit.
MEET THE EXPERT
Jeri Groce is a Senior Manager in the Firm’s Audit Division and is a part of the Firm’s Public Sector Industry Group. She specializes in planning and conducting audits for nonprofit, higher education and governmental entities and has extensive experience in single audits. She can be reached at 334.260.2324 or Jeri.Groce@warrenaverett.com.
