Single Audit Requirements: Who Needs One and How to Prepare

The Single Audit -- formally known as the audit required under the Uniform Guidance (2 CFR Part 200) -- is one of the most consequential compliance obligations facing nonprofit organizations, state and local governments, and universities that receive federal funding. It is not simply a financial statement audit with an additional report attached. It is a comprehensive review of your organization's compliance with federal program requirements and the adequacy of your internal controls over those programs. Understanding the threshold, the mechanics, and the most common findings is essential for any CFO or executive director managing federal awards.

The $1,000,000 Threshold Explained

The Single Audit threshold is $1,000,000 (raised from $750,000 effective for fiscal years beginning on or after October 1, 2024) in federal expenditures in a single fiscal year, as established by 2 CFR Part 200, Subpart F (the Uniform Guidance). This threshold applies to the total of all federal financial assistance your organization expends, not just direct federal awards. Pass-through funding -- federal dollars that flow through a state agency, local government, or another nonprofit to your organization -- counts toward the threshold. If you receive a $600,000 state education grant that is funded by federal Title I dollars and a $500,000 direct federal award, you have likely crossed the $1,000,000 threshold and owe a Single Audit.

What Counts Toward the Threshold

Federal expenditures include grants, contracts, loans, loan guarantees, property, cooperative agreements, interest subsidies, insurance, and direct appropriations. The key question is whether the funding originates from a federal source. Review the CFDA (now Assistance Listings) number on each award -- any number in the federal assistance catalog counts toward your threshold. Medicaid matching payments, FEMA reimbursements, SNAP benefits administered by a nonprofit, and federal student aid programs all count. Your pass-through entity is required to inform you of the federal award identification information so you can properly track expenditures by CFDA number.

Major Program Determination: Type A and Type B

Once your auditor confirms a Single Audit is required, they must identify your major programs -- the programs that will receive compliance testing. The Uniform Guidance uses a risk-based approach to select major programs. Programs are first classified as Type A (larger programs based on a dollar threshold: the greater of $1,000,000 or 3% of total federal expenditures, up to a maximum threshold at higher spending levels) or Type B (all other programs). Type A programs are presumed major unless the auditor assesses them as low risk based on prior audit results. Type B programs are selected based on a risk assessment. Typically, your auditor will test compliance for at least 20% to 40% of your total federal expenditures through major program selection.

The Federal Audit Clearinghouse Submission Deadline

Completed Single Audit reporting packages must be submitted to the Federal Audit Clearinghouse (FAC) within 30 days of receiving the auditor's reports, or within nine months after the end of your fiscal year -- whichever comes first. For a December 31 year-end, that means September 30. For a June 30 year-end (common for nonprofits and universities), that means March 31. Late submissions trigger notifications to federal agencies and awarding agencies and can affect future grant awards. The reporting package consists of the financial statements, notes, auditor's reports on financial statements, internal controls, and compliance, the Schedule of Expenditures of Federal Awards (SEFA), and any corrective action plans for findings.

Common Single Audit Findings

Based on patterns across thousands of Single Audit reports, the most frequently cited findings fall into several categories. Travel and expense reimbursements are consistently the top finding: organizations reimburse costs that are unallowable under 2 CFR Part 200 (entertainment, alcohol, certain membership fees) or lack adequate documentation (missing receipts, no business purpose stated). Procurement violations are the second most common: organizations fail to follow required competitive procurement procedures for purchases above federal thresholds or cannot demonstrate that procurement was conducted at arm's length. Subrecipient monitoring failures occur when organizations that pass through federal funds to subrecipients do not perform required monitoring of those subrecipients, including reviewing financial reports, conducting site visits, and checking for debarment. Eligibility documentation errors arise when organizations cannot demonstrate that beneficiaries of federal programs met eligibility requirements. Reporting violations occur when federal financial reports (SF-425 Federal Financial Reports, draw requests) contain errors or are submitted late.

Sub-Recipient Monitoring: The Most Overlooked Requirement

Organizations that pass federal funds to other entities -- known as pass-through entities -- have significant responsibilities under 2 CFR Part 200. You must determine whether your subrecipients are subject to Single Audit requirements, review each subrecipient's Single Audit reports if they are required to have one, issue subawards that identify the federal award information (CFDA number, award number, name of federal agency), monitor subrecipient activities to ensure federal funds are used appropriately, verify that subrecipients are not suspended or debarred (check SAM.gov), and take enforcement action if problems are found. Many organizations that act as pass-through entities for the first time are surprised by how comprehensive these requirements are.

How to Prepare for a Single Audit

Preparation starts with the Schedule of Expenditures of Federal Awards (SEFA). This schedule lists all federal awards expended during the year, organized by federal agency and CFDA number. Your accounting system must be capable of tracking expenditures by award throughout the year -- not just reconstructing them at year-end. Ensure your grant files are complete and accessible: award agreements, amendments, budget modifications, prior reports, and correspondence should all be filed systematically. Train your program staff on allowable cost principles under 2 CFR Part 200, particularly around documentation requirements for payroll, travel, and equipment. Conduct a pre-audit internal review of a sample of expenditures in your major programs to identify errors before your auditor does.

When Findings Are Issued

If your auditor issues a finding -- a material weakness, significant deficiency, or instance of noncompliance -- you are required to prepare a corrective action plan (CAP) that becomes part of the reporting package submitted to the FAC. The CAP must describe the actions your organization has taken or plans to take to correct each finding, who is responsible, and the expected completion date. Federal agencies review your CAP and prior audit findings when making new award decisions. A pattern of repeat findings in the same area can raise serious concerns with your program officers and, in extreme cases, lead to suspension of funding.