What is a Single Audit? Requirements and Process
Organizations that receive federal funding in the United States are often subject to a single audit. This specialized type of audit serves a dual purpose: it examines both the financial statements and the entity's compliance with federal award requirements. For auditors and organizations alike, understanding when a single audit is required and how it differs from a standard financial statement audit is essential.
Defining the Single Audit
A single audit, also known as a Uniform Guidance audit, is an organization-wide audit that satisfies the requirements of the Single Audit Act and the Uniform Administrative Requirements set forth in 2 CFR Part 200. Rather than requiring separate audits for each federal program, the single audit consolidates oversight into one comprehensive engagement.
The audit covers two main areas. First, the auditor examines the entity's financial statements, just as in a traditional financial statement audit. Second, the auditor evaluates the entity's compliance with the specific requirements of its federal programs, focusing on those identified as major programs.
Who Needs a Single Audit?
Any non-federal entity that expends $750,000 or more in federal awards during its fiscal year is required to have a single audit. This threshold applies to state and local governments, tribal organizations, universities, hospitals, and nonprofit organizations that receive federal grants, contracts, or other forms of federal financial assistance.
The $750,000 threshold is based on total federal expenditures across all programs, not on any single award. Organizations that fall below this threshold are exempt from single audit requirements but may still be subject to other federal or state audit requirements.
Key Components of a Single Audit
Financial statement audit. The auditor issues an opinion on the entity's financial statements, following generally accepted auditing standards (GAAS) and, for governmental entities, Government Auditing Standards (the Yellow Book).
Schedule of Expenditures of Federal Awards (SEFA). The entity prepares a schedule listing all federal awards expended during the audit period. This schedule is the foundation for determining which programs are major programs.
Determination of major programs. The auditor applies risk-based criteria to identify which federal programs will receive detailed compliance testing. Larger programs and those with prior findings are more likely to be selected as major programs.
Compliance testing. For each major program, the auditor tests compliance with the specific requirements outlined in the Compliance Supplement. These requirements are grouped into categories such as eligibility, allowable costs, matching, reporting, and procurement.
Internal control over compliance. The auditor evaluates whether the entity's internal controls are sufficient to ensure compliance with federal program requirements. Weaknesses in these controls are reported as findings.
Reporting. The single audit results in several reports, including the financial statement opinion, a report on internal control and compliance under Government Auditing Standards, a report on compliance for each major program, and a schedule of findings and questioned costs.
Common Compliance Requirements
The Compliance Supplement, published annually by the OMB, identifies the specific requirements that apply to federal programs. While requirements vary by program, the most commonly tested areas include:
Allowable costs ensure that expenditures charged to federal programs are permitted under the terms of the award and applicable cost principles. Eligibility requirements verify that only qualified individuals or entities receive benefits. Period of performance rules confirm that costs are incurred within the authorized grant period. Reporting requirements ensure that financial and performance reports are submitted accurately and on time.
Challenges in Single Audits
Single audits are complex because they require expertise in both financial statement auditing and federal compliance. Auditors must stay current with changes to the Compliance Supplement, which is updated annually. Additionally, entities often struggle with maintaining adequate documentation to demonstrate compliance, particularly for eligibility determinations and procurement procedures.
The volume of documentation involved in a single audit can be substantial. Auditors frequently review hundreds of transactions across multiple programs, each with its own set of compliance requirements.
Improving Single Audit Efficiency
Given the document-intensive nature of single audits, tools that automate document extraction, organize supporting evidence, and match transactions to compliance requirements can significantly reduce the time and effort required to complete these engagements.
Handle the document demands of single audits with Blast Audit — the Excel add-in that automates extraction and matching for auditors.