Understanding Your Options: Single Audits and Program-Specific Audits for Nonprofits
In a previous article, we reviewed the key components of a Single Audit, which is required for nonprofit organizations that expend a certain threshold of federal expenditures. Nonprofit organizations that expend federal funding must comply with the audit requirements established in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (commonly referred to as the Uniform Guidance). For many organizations, this means undergoing a Single Audit when federal expenditures exceed $1,000,000 during a fiscal year.
However, the Uniform Guidance does allow an alternative in certain circumstances: a program-specific audit. Understanding when this option is available, and whether it makes sense for an organization, can help nonprofits manage compliance while balancing cost and administrative burden.
Overview of Uniform Guidance Audit Requirements
Under the Uniform Guidance, a nonprofit organization that expends $1,000,000 or more in federal awards in a fiscal year must undergo one of the following:
- A single audit, or
- A program-specific audit (if certain conditions are met)
The single audit is the default requirement and the most common approach. A program-specific audit is permitted only when an organization meets specific criteria.
What Is a Single Audit?
A single audit is a comprehensive audit that includes:
- An audit of the nonprofit organization’s financial statements
- Testing of internal controls over compliance
- Compliance testing for major federal programs
- Reporting on compliance with federal regulations
The auditor determines which federal programs are major programs based on risk and expenditure thresholds and performs detailed compliance testing on those programs.
Single audits are designed to provide federal agencies and pass-through entities with assurance that federal funds are used appropriately.
What Is a Program-Specific Audit?
A program-specific audit focuses solely on one federal program rather than the nonprofit organization as a whole.
Under Uniform Guidance, this option is only available when:
- The nonprofit organization expends federal awards under only one federal program, and
- The program’s statutes, regulations, or terms and conditions do not require a financial statement audit.
In this case, the audit focuses only on the compliance requirements of that single program rather than the nonprofit organization’s overall financial statements.
Program-specific audits must still follow Uniform Guidance requirements and utilize the applicable Compliance Supplement guidance for that program.
When Is a Program-Specific Audit Appropriate?
A nonprofit organization may consider a program-specific audit when:
- All federal expenditures relate to one federal program
- The nonprofit organization does not receive multiple federal programs
- The federal program’s requirements do not mandate a full single audit
- The nonprofit organization seeks a more focused and potentially lower-cost audit approach
Common examples may include nonprofit organizations receiving funding under a single federal grant program, such as a public health initiative or a housing program funded through a single federal source.
However, if a nonprofit organization receives multiple federal programs, even if administered by the same federal agency, it typically must undergo a Single Audit.
Advantages and Disadvantages of a Single Audit
| Advantages | Disadvantages | |
| Comprehensive oversight – A single audit evaluates both the nonprofit’s financial statements and its compliance with federal requirements, which is often viewed as more useful by stakeholders | Higher cost – Single audits generally require more audit work due to financial statement auditing and multiple compliance areas | |
| Recognized standard for federal funding – Many grantors, lenders, and boards are familiar with single audits and may expect this level of service | More administrative effort – Management must prepare financial statements, documentation, and required schedules |
Advantages and Disadvantages of a Program-Specific Audit
| Advantages | Disadvantages | |
| Lower cost in many cases – Because the scope is limited to one federal program, audit procedures are likely less extensive | Limited applicability – Program-specific audits are only allowed when one federal program is involved | |
| Reduced administrative burden – Nonprofit organizations may avoid the need for a full financial audit if one is not otherwise required | Future transition to single audit – If a nonprofit organization later receives funding from additional federal programs, it may need to transition to a single audit. | |
| Less comprehensive oversight – Nonprofit organization stakeholders receive assurance only about that program, and not the nonprofit organization’s financial statements. | ||
| Potential stakeholder expectations – Certain lenders, boards, or grantors may still request audited financial statements even if a program-specific audit is permitted |
Key Questions to Consider
Before choosing between a program-specific audit and a single audit, leadership should consider:
- How many federal programs does the nonprofit organization receive funding from?
- Do any grant agreements require a single audit?
- Do lenders, boards, or funders expect audited financial statements?
- What are the cost implications of each option?
- Is the nonprofit organization likely to receive additional federal funding in the near future?
Consulting with an audit advisor can help determine the most appropriate approach based on one’s nonprofit organization’s funding structure and compliance requirements.
Final Thoughts
The program-specific audit option under Uniform Guidance can be a useful alternative for nonprofit organizations that receive funding from only one federal program. It allows nonprofit organizations to focus audit efforts directly on compliance with that program while potentially reducing cost and administrative burden.
However, because of its limited applicability and narrower scope, many nonprofit organizations ultimately rely on single audits to meet federal compliance expectations and provide broader assurance to stakeholders.
Understanding these options helps leaders make informed decisions about audit requirements and ensure continued compliance with federal funding regulations.
If you have questions about the information outlined above, please contact us; our seasoned and experienced nonprofit professionals are here to help. You can also learn more about our nonprofit services by visiting our Nonprofit industry page.
About the Author
Jackie Winchell, CPA is a Director in the firm’s Assurance and Advisory practice, specializing in audits and consulting services for nonprofit organizations and affordable housing entities.… Read more
