Will Your Nonprofit Face a First-Time Single Audit?
Pandemic Funding: Nonprofits Facing First-Time Single Audits
Did your nonprofit receive any type of stimulus funding from the federal government during the pandemic? If so, your organization may be subject to an unexpected audit. Known as a “Single Audit,” many nonprofits are facing them for the first time. If yours is one of them, don’t worry. We’re empowering you with answers to frequently asked questions, how and when a “Single Audit” is triggered, and the best ways to prepare for one.
What is a Single Audit?
A Single Audit is very similar to a standard financial audit, where auditors review your organization’s financials to ensure that all necessary controls are in place and that your statements are accurate.
Note: The difference with a Single Audit is that auditors take it a step further by assessing your organization’s compliance with any federal funding received. “Single” refers to the fact that nonfederal entities perform just one audit instead of multiple audits of each program that received federal funding.
Will my nonprofit be audited?
The answer depends on several factors — but the simple answer is that a Single Audit is triggered when a nonprofit expends more than $750,000 in federal grants and awards in a single fiscal year. Figuring out if your organization has hit that threshold is the challenging part. Some funding counts and some don’t. For example, grants and loans from the Paycheck Protection Program (PPP) don’t count toward the $750,000 threshold. However, funding from the Economic Injury Disaster Loan (EIDL) program does. Funding received from a pass-through entity in which your nonprofit was the sub-recipient counts too. An example is when a nonprofit private school receives local school district money that originated as federal funds. Considering those scenarios, it’s likely that some of the grants and awards you received from foundations or local and state governments may have, at least partially, come from federally-funded programs. They all count toward the $750,000 threshold.
When does a Single Audit occur, and when is it due?
A Single Audit takes place at the same time as your yearly financial audit. However, a Single Audit must be submitted to the Federal Government via the Federal Audit Clearinghouse, which operates on behalf of the Office of Management and Budget. The due date for submission is typically 30 calendar days after receipt of the audit report or nine months after the end of the audit period.
How to prepare for a Single Audit
Prepare yourself by reading and understanding the compliance guidelines for any grants or federal funding your nonprofit has received. Also, gather all evidence that shows how those funds were expended. Check your nonprofit’s current internal controls, systems, and processes to ensure proper tracking and matching of any incoming and outgoing program dollars. If you don’t already have an internal control roadmap in place, now is the time to formulate and document one. That way, auditors will have a guide. Also, you’ll want to draft your Schedule of Expenditures of Federal Awards (SEFA). This is a financial statement that lists your nonprofit’s expenditures of federal assistance for the fiscal year by:
- Federal agency
- Grant number
Your SEFA must be accurate and complete. If not, you may risk overlooking a Single Audit when one might be required.
Bottom line, as long as your nonprofit has utilized funds as intended, you’ll be fine. And a Single Audit doesn’t have to be daunting, especially since the most common findings are usually flaws with internal controls — something that’s easily correctable. Our team of nonprofit accounting experts at Qbix can help with that, as well as strengthen your reporting, help draft your SEFA, and so much more. Whether this is your first Single Audit or not, we’re happy to simplify the process for you so that it’s easy, quick, and painless. Let’s schedule a call and determine your next steps today. You’ll be so glad you did.
Non Profit Accounting Solutions
Qbix's goal is to provide the latest cloud-based accounting technology while delivering real-time visibility into your nonprofit's financials 24/7. Numbers are our passion, but providing your nonprofit with the financial expertise needed to facilitate growth and profitability is our top priority. And because no two organizations are the same, Qbix offers the flexibility you need to accomplish your nonprofit's goals.
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