Federal Funds and Your Audit Requirements
Your organization has just received its first federal grant award and everyone is thrilled. As the celebration is going strong and everyone is in high spirits, the executive director mentions that she heard from a colleague that these federal awards come with extra strings attached. She asks you, the controller, if this is the case. You wonder to yourself, what do I need to look out for?
Single Audit Requirements
The first thing to determine is if your organization is now subject to a Single Audit. A Single Audit is a specialized audit that focuses on the federal awards an organization receives. This audit goes beyond analyzing the financials of your organization and takes a deeper look into your organization’s policies and controls.
During this audit, your auditor will spend time gaining an understanding and testing your organization’s internal control processes. Your auditor will also test your compliance with the required provisions of the grant. This audit is traditionally done in conjunction with the organization’s annual financial statement audit, however these are two separate reports. A Single Audit is required for all organizations that expend more than $750,000 in federal awards during a fiscal year.
This threshold takes into account all sources of federal funds received by your organization, no matter if the funds were received directly from a federal agency, or if they were first received by a non-federal entity and then “passed through” to your organization. Additionally, this threshold is based on expenditures during the year, which due to timing differences may not match when the funds are actually received.
All organizations that are subject to a Single Audit must report the results of audit findings to the Federal Audit Clearinghouse. A form SF-SAC must be filled out and submitted online. Once this form is completed, both the auditor and auditee organization must sign and certify the report before submission. This report is publicly available for inspection on the Federal Audit Clearinghouse website.
In addition to this report, there may be other required reports that a federal or local agency may request, such as a copy of your organization’s annual financial statement audit or other specialized reporting requirements which vary from grant to grant. A listing of required reports will generally be included in the grant instructions or other documentation. Additionally, reporting requirements for all federal grants may be found online at the Office of Management and Budget’s Compliance Supplement found at www.whitehouse.gov/omb .
Covering Your Bases
In addition to the above audit and reporting requirements, the grant agreement may spell out additional requirements related to all aspects of the grant. This may include compliance requirements, oversight of any sub-recipients used, further periodic reporting and much more. Due to the increased complexities associated with obtaining federal funding, we recommend consulting with your auditor upon receipt of any new federal grants.
To learn more about single audits, contact Harry Fox at email@example.com, or call him at 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.