Audit and assurance for education

ARTICLE

What is a single audit and when do you trigger one?

Organizations that receive significant federal grant funding should be aware that they are required to complete an annual assurance review known as a single audit. This process is typically conducted by a third-party CPA and is meant to provide oversight on how federal money is being spent. If you’re new to receiving federal grants or your funding levels have recently increased, you may be surprised to discover that you’ve triggered the single audit requirement. (This was a frequent source of confusion during the COVID-19 pandemic, when organizations claiming CARES Act or ARP funding were often shocked to find out about audit rules after the fact.) Keep reading to learn more about single audits, who is subject to one and how the audit process works. What is a single audit? Each year, the federal government distributes billions of dollars in grant funding or other federal assistance to non-federal entities like nonprofits. But how is that money actually being spent? Enter the single audit. A single audit is an annual assurance process meant to ensure that non-federal entities are following the rules about when and how they use the federal funding they receive. This process is known as a single audit because it allows you to audit all of your federal grant spending at once, even if you received funding from multiple grants or agencies. Single audit rules were initially established by the Single Audit Act of 1984 but have been amended or adjusted since then. What is the purpose of a single audit? If you receive federal grant funding, the federal government may require that you complete a single audit to prove you are spending that funding appropriately. During this process, a third-party auditor will carefully audit your financial statements and organizational activities to assess how federal funds have been used and whether your organization has maintained compliance with rules and regulations regarding federal grant funding. What is the trigger for a single audit? In both 2025 and 2026, non-federal entities that accept $1 million or more in federal assistance must complete an annual single audit. Before 2025, the single audit threshold was $750,000. Single audit rules apply regardless of whether your organization receives federal funds directly or indirectly. When calculating whether you’ve reached $1 million in federal assistance, you must include both cash and non-cash assistance that you’ve received. How often is a single audit required? The federal government requires annual single audits for organizations that reach or exceed the $1 million audit threshold. However, the government does not conduct single audits directly. Instead, organizations typically hire a third-party attest firm to do the audit before reporting the results to the federal government. Uniform Guidance audit requirements Per Uniform Guidance regulations, here are some additional single audit requirements : Additional internal control processes will be needed to ensure compliance for major programs, and any findings will be disclosed in your financial statements Identification of the funds received and the major programs under which the funds were received via a schedule of expenditures of federal awards (SEFA) Identifying programs as either Type A or Type B Knowledge of federal statutes, regulations and terms and conditions of the federal awards Disclosure in your financial statements of any findings and follow up on any prior-year findings Preparation and submission of a data collection form directly to the Federal Audit Clearinghouse at the completion of the audit What is the difference between a single audit and a regular audit? An audit is a rigorous oversight process that assesses the accuracy of an organization’s books. During an audit, an auditor (who is typically a CPA) will review your financial statements using GAAP or another accounting standard, assess your internal controls and test transactions to ensure that your financial position is what you say it is. A regular audit focuses on your organization’s finances and is meant to assure shareholders, clients, partners, potential investors, government organizations and the public that you are accurately reporting your financial condition. Large and mid-sized organizations routinely undergo regular audits, including for-profit businesses or other entities that do not receive any federal grants or other federal assistance. Single audits also assess your compliance with grant funding rules A single audit is a specific type of audit that is broader in scope than a regular audit. In addition to evaluating the accuracy of your financial statements, an auditor conducting a single audit will also assess your compliance with rules and regulations that govern how organizations can use federal assistance or grant funding. In other words, if a regular audit is about whether your books are correct, a single audit also takes a deeper look at what you actually did with the money. This includes areas like allowable costs and activities, matching requirements and cash management procedures. How should you prepare for a single audit? Don’t try to prepare for a single audit without outside guidance. Any organization receiving federal assistance that risks triggering single audit requirements should seek out an attest and advisory firm that specializes in single audit and compliance work. This advisor can help you understand compliance requirements, assess your existing controls and recommend improvements. Crucially, your advisor should also be able to perform a single audit when necessary. How much does a single audit cost? A single audit will typically cost at least $10,000. However, that sum can go significantly higher depending on factors like the size of your organization, whether you are receiving federal funds from more than one grant or whether those funds come with any additional complexities or restrictions. Read more 5 common GAAP violations you should know Fixed asset accounting: Asset capitalizing rules, do's & don'ts Effective strategies for preventing and detecting expense fraud in your organization