Organizations receiving federal grant dollars have a responsibility to ensure that funds are properly expended. Audits are the primary mechanism used to ensure organizations uphold this responsibility. It's the government's way of ensuring that recipients of major federal programs are doing what they are supposed to do with the money in a uniform and consistent manner. This publication reviews the basics of a single audit, as well as your primary responsibilities in accordance with the Office of Management and Budget (OMB) Circular No. A-133.
Basics of the Single Audit
Most nonfederal entities annually prepare financial statements and have them audited. A single audit is a rigorous organization-wide review that combines the annual financial statement audit with additional audit coverage of federal funds.
A single audit has two main objectives:
- An audit of the entity's financial statements and the reporting on the Schedule of Expenditures of Federal Awards (SEFA) in relation to those financial statements.
- A compliance audit of federal awards expended during the fiscal year. (This compliance audit provides a basis for issuing an additional report on compliance related to major programs and on internal control over compliance.)
The financial review examines whether the statements and transactions fairly and accurately describe the results of your operations in accordance with Generally Accepted Accounting Principles (GAAP). A compliance review examines whether your organization has complied with laws, regulations, and the provisions of contracts and grant agreements that may have a direct and material effect on each of the major programs. It asks such questions as:
- Is your organization and the federal assistance it receives efficiently managed?
- Does your system of financial management meet the requirements laid out in OMB's grant administration circulars?
- Are financial and accounting duties properly separated to prevent conflicts of interest?
Single audit reports are not intended to provide detailed audit coverage of all the federal awards or provide detailed financial information for individual awards. To do so would be cost-prohibitive. While only a small percentage of programs are reviewed depending upon your assigned risk, organizations should apply the same standards to all federal programs.
Primary Responsibilities
When a single audit or program-specific audit is conducted, your organization is required to:
- Maintain a system of internal control over all federal programs in order to demonstrate compliance with pertinent laws and regulations.
- Identify grant programs by Catalog of Federal Domestic Assistance (CFDA) number and title, awarding agency, year of award, and any pass-through entities, if applicable.
- Ensure that audits mandated under OMB Circular A-133 are performed and filed with appropriate federal entities as required.
- Follow up on any audit findings, questioned costs, or compliance issues. This involves specific responses and, when necessary, taking corrective action that will resolve current and/or previous findings.
- Sign the official data collection and audit submission form that is prepared in conjunction with the independent auditor. The recipient organization is legally responsible for the accuracy and timely submission of these forms, even if the auditor prepares the forms.
As a recipient of federal dollars, anyone directly or indirectly involved with managing and/or implementing of a federally funded project has a responsibility to have a basic understanding of audit requirements for an organization-wide single audit or a program-specific audit. Failure to meet the audit requirements could result in your organization having to repay grant monies and/or losing access to future federal funding. Having a basic understanding can help prevent noncompliance issues and contributes to a sustainable approach to effective grant management.
Download the full article, Federal Single Audits Basics: What it is and What it Requires and contact eCivis to learn how Grants Network: Tracking & Reporting can make single audits a breeze.
