Federal Funds Trigger Single Audits
April 27, 2021
In January of last year, our economy was doing well until COVID-19 came along and punched U.S. businesses and industries in the gut. The federal government responded by creating new programs to assist businesses suffering economic hardship due to the pandemic. Privately-held entities that have never relied on federal funding found themselves in a position where they needed these funds to survive. Many companies didn't realize that if they received federal awards or grants totaling $750K or more, they needed to contact a CPA to perform a Single Audit. While non-profit organizations that typically receive federal funding are familiar with the Single Audit process, many organizations find this process unfamiliar.
A Single Audit is required by the U.S. Office of Management and Budget (OMB) when a non-profit or for-profit company/organization has received and spent $750K or more in federal funds within a single year. Companies or organizations that received federal funds derived from the CARES Act, Paycheck Protection Program (PPP), and/or Economic Injury Disaster Loan program (EIDL) combined with other federal income sources like grants may be subject to a Single Audit.
So Many Audits! What is the difference between an IRS Audit, an Audit, and a Single Audit?
An IRS audit is a review/examination of an organization's or individual's accounts and financial information to ensure information is reported correctly according to tax laws and to verify the reported amount of tax is correct. A financial audit is an examination of an organization's financial position and revenue, and expenses. The financial audit is often done by an outside independent CPA firm.
A Single Audit goes a step further due to the OMB's requirements. Single Audits require a more rigorous process that entails more testing of controls and programs. It necessitates that CPAs perform the audit under governmental accounting standards. Many CPA firms do not provide this service since they lack the necessary compliance tools to dive deep into the federal program's specifics or understand the rules surrounding the spending of federal funds.
Whether it is a grant or funds derived from the CARES Act, each federal funding source has a requirement specifying the implementation requirements. Suppose an organization received multiple federal funds totaling $750K or more. The CPA is required to review each program to ensure the organization complies with any special government regulations or laws applicable to the specific federal funding source. Unlike a financial or IRS Audit, the CPA must submit the Single Audit to the Federal Audit Clearinghouse for review.
Traditionally, organizations must submit their Single Audits within nine months of the fiscal year-end. For 2021, the OMB has provided a three-month extension beyond the regular due date for organizations that received COVID-19 related funding. However, organizations that are not familiar with the requirements and controls of Single Audits should not wait to contact their CPA to discuss the in-depth needs of this process.
Single Audits Demand Accuracy and Experience.
The Cambaliza McGee Difference. At our firm, we pride ourselves on creating lasting relationships and understanding your business's nuances, critical for organizations that require a Single Audit. Your Single Audit is conducted by one of our partners. You have a direct line to them all year long, providing the continuity and experience you need and deserve.
If you have worked with larger firms on your Single Audit in the past, your audit was most likely not conducted by a partner, and you experienced turnover on your audit team yearly. Unfortunately, this means you needed to invest more of your time to retrain and educate your new CPA team annually. This would not be a concern if you chose to work with Cambaliza McGee LLP.
We have the expertise and experience in conducting Single Audits for clients, and we want this experience to be as painless as possible. While the audit is necessary, we are here to help companies be compliant, educate them on the process, and ensure they are financially stable. This process is vital, especially for our non-profit clients who rely on federal grants and funding each year.
2020 was challenging enough for your business. Entrust your Single Audit to a firm that is invested in your success for your Single Audit and beyond. Contact our team today.