As a result of the Covid-19 pandemic, the U.S. government has implemented a number of measures to provide economic support to businesses. Perhaps the most impactful has been the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided $2.2 trillion of funding for individuals, Paycheck Protection Program (PPP) loans, unemployment benefits and direct aid to businesses and state & local governments.
The direct aid to businesses and state & local governments has likely increased the need for single audits to be performed in 2020 and into 2021. Thousands of entities could be subject to a single audit, which is required when an entity expends $750,000 or more of federal funds during the entity’s business year. These funds can be provided directly from the federal government or, more commonly, are passed through state and local governments or other not-for-profit organizations. Also, entities are required to aggregate all sources of federal funds when determining whether they have met the $750,000 threshold.
A single audit includes a financial statement audit, and also subjects the entity to Government Auditing Standards as well as Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Government Auditing Standards requires testing over internal controls over financial reporting and on compliance with laws, rules, regulations, contracts and grant agreements. The Uniform Guidance requires testing of internal controls over compliance and on compliance itself with federal regulations.
If your organization has not experienced a single audit, it may not sound different than a regular audit, but it is. A single audit includes detailed testing over key areas of internal control over compliance as well as testing of compliance with laws, rules and regulations. There are requirements to maintain written policies and procedures for various documents and reporting. Finally, the financial statements and reporting package must be reported to the federal oversight agencies within nine months of the organization’s year-end.
If your organization already receives a single audit, you know that not all audits (and auditors) are created equally. In 2015, the American Institute of Certified Public Accountants (AICPA) released a study that indicated nearly half (48%) of the audits reviewed were non-conforming. Firms that perform fewer than 10 single audits in a year had failure rates between 49%-62%. The more audits a firm performs, the higher the likelihood of conforming audit success. CSH performs over 100 single audits every year.
If you are new to the single audit requirements and would like further information please feel free to contact us to help you determine the best path forward for your organization.