Federal financial assistance during the COVID-19 pandemic was a lifesaver for many businesses. But in its wake, companies may be required to complete a single audit for the first time. Whether you need to educate your clients about this possibility, or you work in corporate finance and must help your employer navigate a single audit, here are details you need to know.
What is a single audit?
A single audit is normally required by the Office of Management and Budget’s Uniform Grant Guidance (UGG) for a nonprofit or governmental entity that expends $750,000 or more of federal assistance during its fiscal year. The auditor reviews the organization’s financial statements and federal awards to ensure the money was spent according to its stipulations.
Because of monetary relief programs implemented by the federal government during the pandemic, many for-profit organizations that received federal funds are facing their first-ever single audit requirement. Some organizations may not have even been aware of the requirement when they accepted the funds.
What federal funding programs trigger a single audit?
Experts admit that determining which funding triggers an audit is confusing. “…There’s been so much funding that’s come out so quickly, and some of the guidelines were delayed in actually coming out to the public in understanding what counts and what does not count,” said Deetra Watson, CPA, CGMA, on a July 8 Journal of Accountancy podcast episode on the topic.
Funds received from one of the highest-profile programs, the Paycheck Protection Program (PPP) do not trigger single audits. However, Economic Injury Disaster Loans (EIDL) do. To help navigate the requirements, the American Institute of CPAs (AICPA) Governmental Audit Quality Center (GAQC) released a chart matrix (PDF) describing which assistance programs trigger an audit and which do not, along with links to relevant agency information.
Last year, the Office of Management and Budget issued a compliance supplement addendum for single audits to help guide practitioners, but it came much later in the year than usual. Thousands of single audits for year-ends earlier in 2020 were delayed. An updated addendum came out in August 2021.
Who can perform a single audit?
An independent auditor must perform an organization’s single audit through a licensed CPA firm enrolled in peer review; it cannot be done by an in-house auditor. If you are a CPA who does not perform audits, or does not have experience performing single audits, you need to advise your clients to engage with a reputable auditor who has experience and meets all the competency requirements established by the Government Accountability Office (GAO), including completion of all the CPE, necessary to perform these types of engagements.
- Single audits: Deliver high quality in a challenging time
- Tips for working with first-time single audit clients
- You have single audit questions, we have answers
- Single audit resources from the AICPA Governmental Audit Quality Center
- VSCPA Audit Resource Center