Why Organizations May Need to Prepare for a Single Audit This Year
If a business or nonprofit received $750,000 or more in COVID-19-related relief or other federal funding in 2021, they may be subject to a Single Audit for the first time.
Over the past two years, many organizations have utilized federal funding for the first time in order to make it through the ongoing challenges of the COVID-19 pandemic. In 2021, several relief programs, including the CARES Act and the American Rescue Plan Act, provided businesses with billions of dollars to help them keep their doors open and ensure their workers were paid. If a business or nonprofit received federal funding in 2021, they might be subject to what is called a “Single Audit” — an audit used to ensure an organization aligns with the distinct, intricate compliance and reporting requirements of federal aid.
Consulting firms like Clearview Group can help companies successfully prepare for an effective Single Audit in order to reduce risk, streamline accounting systems and fine-tune policies and procedures.
“At Clearview Group, we understand that an audit should do more than just ensure compliance,” said Mike Buher, Director of Assurance and Advisory. “Companies of all sizes are being held to much higher standards of accountability than they may have been in the past, especially as more companies receive funding due to the pandemic. The ability to effectively plan, implement and monitor changes required by the ever-changing accounting and reporting standards, or the initial application of existing Single Audit related standards, can be a challenging task for even the most experienced finance teams.”
What is a Single Audit?
The Single Audit was created in 1984 to provide the federal government with assurance that recipients comply with such directives by having an independent external source (the CPA) report on such compliance. Even prior to the pandemic, the federal government provided over $400 billion annually in federal assistance through thousands of individual grants and awards for the purpose of benefiting the general public. Recipients must comply with applicable federal and state laws and regulations, as well as any provisions tied with the specific assistance.
Today, if an organization is a non-federal entity and expends $750,000 or more in federal funds in one year, the organization may need a Single Audit.
A Single Audit includes two sections: compliance and financial. The financial component consists of an audit of the entity’s financial statements and accompanying notes and is more thorough than an audit performed in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The compliance audit covers operations, internal controls over financial reporting and compliance with provisions of laws, regulations, grant agreements and contracts relating to federal awards.
How Clearview Group Can Help Organizations Navigate Single Audit Reporting and Compliance Requirements
A Single Audit can be simple or complex — it all depends on the federal program and the independent recipient. Since each awarding agency has its own grant agreement, terms and Assistance Listing Program title and number that determine related reporting requirements, Clearview Group can help organizations determine which funding programs are subject to Single Audit requirements.
This year, funds distributed through the SBA’s Paycheck Protection Program (PPP), for example, are not subject to Single Audit requirements. Funds distributed through the SBA’s Economic Injury Disaster Loan (EIDL) Program, on the other hand, are subject to Single Audit requirements, unless it is an EIDL emergency advance.
Once it is determined that a Single Audit is required, Clearview Group can help organizations determine the timing of the process, which will differ greatly depending on the type of funding.
Additionally, it is important that organizations determine their entity type, governing standards and recipient role. “An organization may be subject to reporting in compliance with generally accepted government auditing standards, Yellow Book requirements or even a program-specific audit,” said Buher. “When it comes to an organization’s role, it can get complex, with several organizations considered a recipient, a subrecipient and a contractor simultaneously. That is why a team of qualified professionals can act as a valuable partner to help organizations sort all of this out.”
Last, but certainly not least, Clearview Group will ensure clients remain in compliance. Clearview understands the intricacies of Single Audit reporting requirements and can help clients navigate and comply with new and evolving legislation.
For example, the OMB recently released more clarity about requirements and procedures related to two key federal government COVID-19 relief programs. OMB issued Addendum No. 1 to the 2021 Compliance Supplement in December, which provides new guidance for auditing funds received from the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) and an update to the Education Stabilization Fund (ESF) program section.
“Noncompliance may lead to legal action, the grantee having to pay back disallowed costs or the federal government withholding, suspending or terminating an organization’s award,” Buher notes. “The organization could also end up in a high-risk category, which increases the odds of future audits and may even impact the organization’s ability to secure additional federal funding.”
How Clearview Group’s Audit and Advisory Approach Stands Out from the Rest
Over the next few years, Single Audits will become increasingly common as organizations utilize government funding to make it through the COVID-19 pandemic. Clearview Group takes pride in offering an audit approach that allows the firm’s teams to work seamlessly with an organization and minimize any interruption to daily business operations.
In addition to being seasoned CPAs, the Clearview Group team is registered with the Public Company Accounting Oversight Board (PCAOB), which further demonstrates the firm’s commitment to serving clients in all stages of growth.
“We know right now is a difficult and stressful time for many businesses, and while federal funds may have proven to be a valuable lifeline over the past year, there is no reason those funds should result in additional stress due to Single Audit reporting requirements,” Buher said. “When working with us, you not only receive highly qualified, time-honored services from professionals who understand the unique needs of your business, but also the confidence that your company has the policies and procedures in place to meet your current and future objectives.”
For more information, visit: http://www.4ugod.com/what-we-offer/assurance-advisory/.