What Are the Single Audit Requirements in 2025?

Organizations that receive federal funding must maintain strict accountability for how they use these funds. A Single Audit is a compliance audit under Generally Accepted Government Auditing Standards and includes a comprehensive examination of an organization's financial practices and compliance with federal requirements. Let's explore what organizations need to know about Single Audit requirements and how to prepare for them.

The Objectives of Single Audits

A Single Audit combines a financial statement audit with a compliance examination for organizations that receive federal funding. It's designed to ensure that organizations expending federal awards meet regulatory requirements and maintain accountability for the funds they receive.

This type of audit examines both the organization's financial statements and their compliance with federal award requirements for major programs (see Title 2 Code of Federal Regulations (CFR) Section 200.518 and Section 200.519).

A Single Audit determines if the recipient (auditee) has:

• Established an accounting system with proper internal controls for all financial resources.
• Created financial statements that accurately reflect the organization's financial position and comply with Generally Accepted Accounting Principles (GAAP).
• Submitted timely and accurate financial reports that align with award terms.
• Used federal funds legally and followed all applicable regulations.

Single Audit vs. Standard Independent Audit

Unlike a standard independent audit, a Single Audit goes much deeper by examining:

1. Financial statement accuracy: Verifying that financial reports precisely match federal cost principles, tracking every dollar against strict governmental accounting standards.
2. Internal controls: Thoroughly checking the organization's financial management systems to identify potential weaknesses or vulnerabilities.
3. Regulatory compliance: Ensuring the organization follows specific rules tied to each federal funding stream, with a detailed examination of grant-related regulations.

Who Sets the Requirements of a Single Audit?

The Office of Management and Budget (OMB) sets the standard for Single Audits. The Single Audit threshold — for fiscal years ending on/after October 1, 2024, the amount is $1 million — determines which non-federal entities (NFEs) must undergo these audits. Any NFE that spends more than this amount in federal funds annually must complete a Single Audit.

NFEs encompass:

• State and local governments
• Indian tribes
• Higher education institutions
• Non-profit organizations

Before October 1, 2024, the threshold for Single Audits was $750K.

Expended Federal Awards

Our team at SSL Associates has put together the table below to clarify when federal funds are considered expended for different types of assistance, informing Single Audit applicability.

For example, if the entity spends less than $1M in federal grants, they simply need to inform the SCO in writing that they are exempt from a full audit.

If the entity spends between $1M and $1M + any state grants, they can either submit their full audit report or a letter explaining why they don't need one. The SCO will then issue a "No Review Letter" to the entity.

If the entity spends $1M or more in federal grants, including any state grants, they are required to submit a complete audit report to the SCO for review. Keep in mind that these reports are reviewed in the order they are received.

What Is the Timeframe for Conducting a Single Audit?

Single Audits are carried out after an organization's fiscal year ends. The audit findings and reports must then be submitted to the Federal Audit Clearinghouse (FAC). This submission occurs within 30 days of receiving the auditor's report or within nine months of the organization's fiscal year-end, whichever comes first.

Types of Single Audit Findings

Single Audit findings can be classified as either financial statement-related or related to compliance. Here’s an overview of each classification.

1. Financial Statement

Financial statement findings relate to accounting controls and assumptions used in preparing accounting records. These findings indicate departures from GAAP or deficiencies in internal controls that affect the fair presentation of financial statements.

2. Compliance

Compliance findings pinpoint instances where organizations fail to meet federal requirements. These may involve noncompliance with federal laws, regulations, or program conditions.

Each finding is specifically linked to compliance issues within major programs:

• Control deficiency: A control deficiency occurs when the design or operation of financial controls doesn't allow management to prevent or detect misstatements quickly. This could involve missing controls or existing controls that don't function as intended.
• Significant deficiency: This is a serious issue with controls that could affect financial reporting or program rules. It isn't as severe as material weaknesses, but it still needs attention.
• Material weakness: Material weaknesses represent serious deficiencies that could lead to material misstatements in financial reports or significant program non-compliance. These issues need immediate attention and corrective action.

Common Issues with Grant Rules

Grant management can bring challenges to organizations. Below, our team has identified some of the most frequently encountered obstacles.

1. Reporting Discrepancies

Organizations often struggle with timely and accurate reporting requirements such as proper time tracking, maintaining adequate records, and meeting submission deadlines for needed documentation.

2. Difficulties with Matching Funds

Managing and tracking required matching contributions can also be challenging, from monitoring cash and in-kind contributions to handling currency conversions and ensuring sufficient matching funds are secured.

3. Sub-Recipient Oversight Challenges

Organizations face difficulties in managing sub-recipients effectively. This can include anything from communicating requirements clearly to conducting proper risk assessments and maintaining adequate monitoring procedures.

4. Eligibility Determination

Maintaining proper documentation and standardized processes for determining participant eligibility is often challenging and it may lead to inconsistencies and potential compliance issues.

5. Allowable Cost Issues

Problems often arise with cost allocations, particularly in payroll estimates and expense documentation. This may create potential compliance vulnerabilities in program spending.

6. Indirect Cost Complications

Organizations struggle with consistently applying indirect cost rates and proper classification of costs. They sometimes inadvertently include unallowable expenses in their calculations.

7. Procurement

Consistent enforcement of procurement policies, proper vendor evaluation, and maintenance of complete documentation often pose noteworthy challenges in grant management.

How Does an Auditor React to a Single Audit Finding?

When auditors uncover an issue, they usually explain the applicable regulations and suggest solutions. These solutions could include training staff, implementing new internal controls, or conducting regular compliance reviews. However, the organization is ultimately responsible for addressing these findings promptly.

How to Prepare for a Single Audit

Successful Single Audit preparation requires careful planning and organization, and our CPAs at SSL Associates are here to guide you. Start by gathering and summarizing all information related to federal grants received. Then, prepare detailed financial statements and a draft SEFA. Review and update internal controls and policies to ensure compliance with federal requirements.

Document retention is crucial — be sure to maintain organized records of all grant-related activities and decisions. You should also review prior audit findings and prepare responses to show you’re making progress on addressing previous issues.