Preparing For Your First OMB Single Audit | SVA CPA

Though the federal government has intervened in the past to prevent financial meltdowns in the market, the money injected into the economy during the COVID-19 pandemic involved a much larger amount of cash.

However, much of the funding that was provided to businesses, individuals, and nonprofit organizations is subject to OMB single audit requirements if the party in question spent over $750,000 of federal funds during a single fiscal year.

Though more robust funding options (such as the Paycheck Protection Program) aren’t subject to the requirement, other funding (such as the Shuttered Venue Operator Grant) is required.

If your business or organization is in a situation where you might be subjected to an OMB Single Audit, you might start out by knowing what's involved and what you'll need to prepare for an audit.

Here are a few actions you should consider if your organization can fall under these requirements:

Carefully Read Your Grant Agreement

Note whether your grant is subject to Single Audit requirements as you read. Most grants requiring audits list them in your agreement, but if it's not specified, ask the grant officer at the federal agency to verify that it's not required.

Review the grant period and budget to ensure you know when to spend the funds by and on what. Note additional reporting requirements you'll need to meet.

Keep Compliance at All Times, Not Only During Audit Preparation

Preparing for a Single Audit isn't something you can just do at the end of your fiscal year when preparing your financial statement audit. Grant compliance must happen in real time through the entire year, as compliance after the fact isn't permitted in most situations.

Have Internal Controls on Compliance

You need to show that not only have you complied with federal Uniform Guidance as well as the grant contract for the Single Audit, but also that you had internal controls in place to stay in compliance.

Documentation of the controls in your policy and procedure manual shows the ability to demonstrate that the controls were exercised during the fiscal year.

Expenditure Timing

Because you can control when the award is spent within the fiscal year, you also have some control over when the Single Audit is triggered. Federal grants typically span at least a fiscal year, even if the grant period only covers one year, unless your grant lines up exactly with your fiscal year.

By spreading the expenses of the grant over multiple fiscal years, you may be able to avoid having fiscal years exceeding $750,000 in federal expenses, which allows you to avoid the Single Audit. However, federal expenditures are based on accrual accounting, not cash, so deferring payment of expenses doesn't defer the expense into the next fiscal year.

Asking for a no-cost extension to the grant period may provide you with additional time, but if the grant officer doesn't approve them, you'll need to finish your expenditures in the original period or return the funding that wasn't spent.

Federal Expenditure Tracking

Your accounting system should allow federal expenditures to be tracked separately, with preference for individual grant tracking. Prepare to create new account sequences for tracking and reporting activity on federal grants.

Use accounting system reporting on each grant to prepare a summary Schedule of Expenditures of Federal Awards so your auditor can include it in reporting.

Single Audit Requirements

Most grants have specific compliance requirements that you'll also need to follow including:

• Allowable Costs and Time of Performance: You need to spend the funding by law using the agreed-on budget within the grant period.
• Managing Cash: If you're allowed to ask for cash advances, are you only using them for near-term federal expenses, and when asking for reimbursement, are the requests substantiated with previously-incurred expenses?
• Matching Contributions: Have you satisfied matching contributions or are on track to meet it before the grant period ends? Have you or are you projected to reach a specific level of effort, objectives, or outcomes specified before the grant ends?
• Procurement, Suspension, and Debarment: Does your procurement process meet Uniform Guidance minimum requirements? Have all procurements with federal funds fallen in that process? Is the vendor debarred from doing business with the federal government?
• Reports: What financial and performance reporting is required of you in the grant agreement?

If you do need a Single Audit, here's how to prepare:

• Document: Create documentation of compliance with requirements, including your internal controls. If you don't have this, the auditor will assume you're out of compliance.
• Good Communication: Ensure everyone involved is made aware of compliance and documentation requirements. Keep communication and reporting with shareholders to ensure compliance. Conduct training to educate staff.
• Supervision: Reviewing and supervising the process ensures you remain in compliance, by cross-reviewing and supervising all who work on the grant's activities and ensuring the finance team captures and reports federal expenditures.

Preparing for a Single Audit can be stressful, but we can help you establish a solid process that works. Contact us today with any questions, for more information, or to consult with our experienced professionals.