Preparing for a Single Audit: The Threshold, the Timeline, and What the Auditor Will Ask For

The short answer. A non-federal entity that expends $1,000,000 or more in federal awards during its fiscal year must have a Single Audit conducted for that year (2 CFR 200.501(a)). The threshold was $750,000 for fiscal years beginning before October 1, 2024. The audit covers the organization’s financial statements and its compliance with the requirements of each major federal program, and the report is due to the Federal Audit Clearinghouse within the earlier of 30 days after receipt of the auditor’s report or nine months after fiscal year end (2 CFR 200.512(a)).

Counting toward the threshold

The threshold is measured by expenditures, not by awards received or cash drawn. Federal funds that pass through a state or county still count; the test is the federal origin of the money, not the identity of the paying agency. Loan guarantees, non-cash assistance, and federally funded property have their own valuation rules at 2 CFR 200.502.

Organizations approaching the threshold for the first time frequently miscount because they track funding by funder rather than by source. A county contract that is 80 percent federally funded contributes 80 percent of its expenditures to the total. The pass-through entity is required to tell you the federal share and the Assistance Listing number (2 CFR 200.332(b)(1)); if it has not, ask.

The schedule of expenditures of federal awards

The auditee, not the auditor, prepares the schedule of expenditures of federal awards, generally called the SEFA (2 CFR 200.510(b)). The schedule lists every federal program by Assistance Listing number, the pass-through entity and its identifying number where applicable, the amount expended, and the amount passed through to subrecipients.

The SEFA is the document from which the auditor determines which programs are “major” and therefore subject to compliance testing. An error in the SEFA propagates into the audit scope. We recommend maintaining it as a live schedule reconciled quarterly to the general ledger, not as a year-end compilation.

What the auditor tests

For each major program, the auditor tests compliance against the requirements in the OMB Compliance Supplement for that program. The requirements fall into a standard set of categories, of which the following produce the majority of findings for nonprofits:

1. Allowable costs and cost principles. Whether charged costs are allowable under Subpart E, and whether personnel costs are supported by records meeting 2 CFR 200.430(g).
2. Period of performance. Whether costs were incurred within the award period (2 CFR 200.309).
3. Reporting. Whether financial and performance reports were submitted on time and reconcile to the ledger.
4. Subrecipient monitoring. Whether the organization performed the risk assessment, provided the required subaward information, and monitored subrecipients as required by 2 CFR 200.332.
5. Procurement. Whether purchases followed the organization’s written procurement policy and the thresholds at 2 CFR 200.320.
6. Equipment and real property management. Whether property records exist and a physical inventory was taken at least every two years (2 CFR 200.313(d)).

A finding in any of these categories must be reported, and repeat findings are reported as such. Federal agencies read the findings. A pattern of findings affects the risk assessment that every future pass-through entity will perform before issuing a subaward.

The documents to have ready

The request list from a competent auditor is predictable. The organization should be able to produce, without assembling them from scratch:

• Award documents, including the notice of award, the approved budget, and every amendment
• The SEFA, reconciled to the general ledger
• Written policies covering procurement, cost allocation, time-and-effort documentation, and subrecipient monitoring
• Personnel activity records for every employee charged to a federal award
• Subrecipient files: the subaward agreement, the risk assessment, monitoring reports, and the subrecipient’s own audit report where one is required
• Drawdown records and the reconciliation of cash drawn to costs incurred
• Equipment inventory and the most recent physical count

The timeline that works

The audit itself takes the auditor three to six weeks of fieldwork. The preparation that determines whether it goes cleanly takes the organization the preceding eleven months. In practice this means: policies reviewed at the start of each fiscal year, personnel records certified at least semiannually, the SEFA reconciled each quarter, and subrecipient monitoring documented as it occurs rather than reconstructed afterward.

Organizations that engage us for audit readiness typically do so in one of two circumstances: they are crossing the threshold for the first time, or they have received a finding and need it remediated before the next cycle. Both are manageable. The second is more expensive.

Regulatory references: 2 CFR 200.501 (audit requirements); 2 CFR 200.502 (basis for determining federal awards expended); 2 CFR 200.510 (financial statements and SEFA); 2 CFR 200.512 (report submission); 2 CFR 200.518 (major program determination); OMB Compliance Supplement, current edition.

This article is general information about federal grant administration. It is not legal or accounting advice.