In a prior article, we discussed five steps to make the audit process smoother for nonprofit audits. This month, we will be exploring additional steps a nonprofit organization can complete to ensure a smooth and efficient audit process for a single audit.
A single audit is required for a nonprofit that expends $750,000 or more of federal dollars (either received directly from the federal government or passed-through from another governmental entity or nonprofit) in a fiscal year. The single audit is utilized by the federal government to ensure the organization is complying with the terms of the award, as well as the Uniform Guidance.
The AICPA noted in an article that an estimated 10,000 to 20,000 organizations will require a single audit due to funding received from the COVID-19 pandemic. As noted by the AICPA,
“single audits are extremely specialized services that require particularly detailed training.”
Whether this is your first single audit or you are experienced with the single audit process, follow these five steps to ensure your single audit is smooth and efficient.
Gather and summarize grants and contracts
It is important that the audit team receives copies of all grants and contracts early in the audit process. Grants and contracts provide critical information needed to prepare a copy of the Schedule of Expenditures of Federal Awards (SEFA). The SEFA is included in the financial statements, as well as used by your auditor to determine the federal programs to test as part of a single audit. These will also be used in addition to the Office of Management and Budget (OMB) Compliance Supplement to identify compliance requirements required to be tested as part of the single audit.
Review the 2022 OMB Compliance Supplement for changes to federal programs
In July’s article we reviewed significant changes to the 2022 OMB compliance supplement. By reviewing the OMB compliance supplement, you will have an understanding of the items of higher significance to the federal government for a particular federal program.
Reconciling federal awards expended to the trial balance
A nonprofit may need to proactively reach out to pass-through agency to make adjustments and confirm the portion of the grant attributable to federal funding prior to the audit commencing. It is important to have an updated and accurate SEFA to your auditors to ensure the correct federal programs are identified for testing.
Be prepared and organized
As your auditors, we will provide the items necessary to begin planning for a single audit, as well as sample requests depending on the nature of the nonprofit’s federal programs. This could be items such as tenant files if federal funds are being used in an affordable housing property or a sample of cash disbursements to test allowability of costs and activities allowed under the Uniform Guidance. Responding to these requests timely helps to ensure an efficient single audit. It is also important these files are centrally located and readily available.
Ensure both your accounting team is discussing with your external audit team deadlines related to specific grants or contracts. Often times, there may be an accelerated timeline for specific federal funding.
Please contact us if you have questions about the information outlined above, our seasoned and experienced nonprofit professionals are here to help. You can also learn more about our Nonprofit services by visiting our website.