Webinar Recap: Single Audit Considerations for Nonprofits
By Jack Abdo, CPA, and Paige Winkelman, CPA
It’s safe to say every organization has grappled with change over the past year. One of the most notable changes impacting nonprofits has arguably been the influx of new funding opportunities due to COVID. While these have provided nonprofits with much-needed financial relief, they’ve also created new administrative challenges.
Here’s an example of one such challenge: If your organization accepted federal funding, it could be subject to certain reporting requirements as well as a Single Audit. To help you understand how to plan and prepare for this type of audit, we recorded a webinar on the topic.
Here’s a quick recap of what we discussed.
What is a Single Audit, and is my nonprofit subject to one?
A Single Audit is a comprehensive financial statement and federal awards audit that must be completed annually by nonprofits and governmental organizations with federal expenditures of more than $750,000 during the fiscal year.
In other words, a Single Audit assesses your organization’s controls and compliance with federal (or federal pass-through) grant requirements. The $750,000 threshold typically applies to the amount your organization spends, not necessarily what it receives.
Why is the Single Audit so important?
The results of your organization’s Single Audit will be presented alongside its financial statement audit as well as a schedule summarizing its federal award expenditures for the year. The entire report is then submitted to the Federal Audit Clearinghouse, where the federal agency that awarded the grant to your nonprofit is notified of the results.
Your organization’s Single Audit results will also be publicly accessible on the Clearinghouse’s website. So, if your organization failed to comply with or had poor controls over federal dollars expended, this could impact its ability to receive funding in the future. Of course, this could subject your organization to additional oversight or audits, too.
Why should you worry about a Single Audit now?
As we mentioned, the availability of new funding opportunities means your nonprofit may have expended more federal funds than ever before. In addition to grants funded under the CARES Act, there could be other grants that your nonprofit received that are funded under other federal programs. These could be funded directly by a federal agency or passed through to your nonprofit by a state or local agency or another nonprofit.
We’ve also seen increased funding opportunities, in which nonprofits have amended current grant contracts or changed compliance requirements, as well as changes in funding sources. An example of the latter: A grant that was formerly 100% direct-state funded that is now partially funded by federal dollars.
What should you do?
The first thing you should do is to determine if your organization is subject to a Single Audit. You’ll need to identify the grants and expenditures your organization had for the period related to these grants. Then, you’ll need to prepare a Schedule of Expenditures of Federal Awards, or SEFA (this is the document I mentioned earlier that is to be included in the audit report) to see what your total federal and pass-through federal expenditures were for the year.
Keep your nonprofit in compliance.
One of the best ways to prepare for a Single Audit—and to make the process go as smoothly as possible—is to begin preparing before your organization accepts the grant. If you have questions about how to plan or prepare for a Single Audit, please know we’re here to help. Contact us today!