Preparing for a Single Audit
For nonprofits, government entities, and other organizations that expend $1 million or more in federal awards in a fiscal year, the Single Audit is a mandatory annual engagement. Unlike a routine financial statement audit, the Single Audit combines financial reporting review with detailed compliance testing of major federal programs. It is more time-intensive, more document-heavy, and less forgiving of disorganized records.
Organizations that prepare well in advance experience shorter timelines, fewer findings, and lower costs. Organizations that treat the Single Audit as a scramble discover problems during fieldwork—when correcting them is expensive and disruptive.
This guide walks through each stage of the Single Audit process, identifies the preparation that should occur before the engagement begins, and explains what auditors look for during planning, fieldwork, reporting, and follow-up.
Understanding What Triggers a Single Audit
The Single Audit requirement applies to any non-federal entity that expends $1,000,000 or more in federal awards during its fiscal year. The threshold is based on expenditures, not awards received. An organization may receive an award in one year but expend the funds over multiple years; the threshold is measured against what was actually spent.
The audit is conducted in accordance with the Uniform Guidance (2 CFR Part 200) and includes:
A financial statement audit
A compliance audit of major federal programs
Testing of internal controls over compliance
Preparation and review of the Schedule of Expenditures of Federal Awards (SEFA)
Even organizations below the threshold remain subject to federal grant management rules. The threshold determines whether a Single Audit is required—not whether compliance obligations apply.
Pre-Engagement Preparation: The Work Before the Work
The most important Single Audit preparation happens before the auditor arrives. Organizations should complete the following tasks well in advance.
Reconcile Federal Expenditures to the General Ledger
The SEFA must agree to the general ledger. If federal awards are tracked in separate accounts, funds, or classes, reconcile the totals to ensure nothing is misclassified or omitted. Discrepancies discovered during fieldwork extend timelines and may result in findings.
Confirm Program Identification and Assistance Listings Numbers
Each federal award should be identified by its Assistance Listings number (formerly CFDA number), the federal agency, and the pass-through entity if applicable. Incorrect or missing numbers create SEFA errors and can affect major program determination.
Verify Subrecipient Information
Organizations that pass federal funds to subrecipients must confirm that each subrecipient is not suspended or debarred. Verification should be performed through SAM.gov before funds are disbursed and documented in the subaward file.
Review Time and Effort Documentation
Salary and benefit costs charged to federal awards must be supported by records that accurately reflect the work performed. The method used to allocate salaries must be documented, applied consistently, and supported by timesheets or activity reports.
Confirm Procurement Documentation
Procurement files for federally funded purchases should include documentation of competition, price reasonableness, vendor selection, and required contract clauses. Missing documentation is one of the most common Single Audit findings.
Stage One: Planning
Defining Scope and Objective
Single Audit planning begins with understanding the organization’s federal awards, internal controls, and compliance environment. The auditor identifies major programs, assesses risk, and designs procedures to test compliance with the requirements that apply to each major program.
The Entrance Meeting
The auditor typically conducts an entrance meeting with management to discuss the purpose of the audit, risk factors, and logistics. Management is included in the planning phase, and the details are documented in a planning and scoping memo. Depending on the organization, the entrance meeting may involve a single email notification, a formal meeting, or both.
Coordination and Scheduling
Planning includes coordination with management to schedule fieldwork during a period when key personnel are available and the necessary records are complete. The auditor provides a Prepared by Client (PBC) list identifying the records and schedules to be prepared. Getting this list early and working through it systematically shortens the audit timeline.
Documentation and Approval
Audit planning should be documented, recording the audit’s objective, scope, methodology, timeline, staffing, and identified risks. In internal audit environments, director or Chief Audit Executive approval may be required before fieldwork begins. For external audits, the engagement letter defines the terms and responsibilities of both parties.
Stage Two: Fieldwork
What Auditors Do During Single Audit Fieldwork
During fieldwork, auditors conduct the steps identified in planning. For Single Audits, this includes:
Interviews with management and staff to understand processes, controls, and significant transactions
Review of laws, policies, and best practices applicable to federal award management
Verification of sample transactions to test compliance with program requirements
Analysis of data sets to identify anomalies and unusual relationships
Surveys where appropriate
Auditors meet regularly with management throughout fieldwork to discuss the status of the audit, preliminary observations, and potential recommendations. Issues raised early can be resolved before they become formal findings.
Compliance Requirements Tested
For each major federal program, auditors test compliance with the requirements in the Uniform Guidance Compliance Supplement. These include:
Activities allowed or unallowed
Allowable costs and cost principles
Cash management
Eligibility
Equipment and real property management
Matching, level of effort, and earmarking
Period of performance
Procurement and suspension/debarment
Program income
Reporting
Subrecipient monitoring
Special tests and provisions
Not all requirements apply to every program. The Compliance Supplement identifies which requirements are relevant for each Assistance Listings number.
What Clients Should Expect
Single Audit fieldwork is document-intensive. Clients should expect requests for grant agreements, approved budgets, drawdown records, timesheets, procurement files, subaward agreements, monitoring documentation, and financial reports submitted to federal agencies.
Practical steps to manage fieldwork:
Designate a primary point of contact to coordinate document requests and schedule interviews
Set internal deadlines for producing requested documents
Organize grant files in advance so supporting documentation can be located quickly
Be responsive to questions — delays extend the timeline for everyone
Raise concerns early — if you disagree with a preliminary observation, address it during fieldwork
Stage Three: Reporting
The Exit Meeting
At the conclusion of fieldwork, auditors conduct an exit meeting with management to discuss the results of the audit, specific findings and recommendations, and other observations. This meeting allows management to hear findings directly, ask questions, and begin formulating responses.
The Audit Observation Memo
Auditors communicate findings to management through an audit observation memo or similar document. Each observation describes the condition, criteria, cause, effect or risk, and recommendation. Management is asked to provide a response with a corrective action plan and timeline.
Management Responses
Management responses are a critical part of the reporting process. A well-crafted response includes concurrence or non-concurrence, the corrective action to be taken, the responsible party, and the implementation date. Vague responses do not satisfy auditors or federal oversight bodies.
The Schedule of Findings and Questioned Costs
For Single Audits, findings are reported in the Schedule of Findings and Questioned Costs. This schedule identifies each finding, the federal program affected, the amount of questioned costs if determinable, and whether the finding is a material weakness or significant deficiency in internal controls over compliance.
Questioned costs arise when expenditures are not supported by adequate documentation, are not allowable under program rules, or are not in compliance with procurement or other requirements. Even immaterial questioned costs can appear in the schedule if they relate to compliance requirements.
Draft Report Review
Management and leadership are provided an opportunity to review drafts and provide feedback before the final report is issued. This review allows for correction of factual errors, clarification of language, and confirmation that the report accurately reflects the organization’s circumstances.
The Final Report
The final Single Audit report includes the independent auditor’s reports on the financial statements and on compliance with federal requirements, the SEFA, notes to the SEFA, the Schedule of Findings and Questioned Costs, and a summary of the auditor’s results.
Stage Four: Follow-Up
Corrective Action Plans
The Single Audit process does not end with the issuance of the report. Management is expected to implement the corrective actions committed to in their responses. For repeat findings, federal agencies may require additional documentation or impose additional oversight.
The Federal Audit Clearinghouse
Single Audit reports are submitted to the Federal Audit Clearinghouse, where they are available for review by federal awarding agencies and pass-through entities. Findings are publicly available and may affect future funding decisions.
Reviewing Prior Year Findings
During the next year’s planning phase, auditors review the prior year’s findings and the status of corrective actions. If a finding from the prior year has not been addressed, the auditor may raise it again or assess whether the unresolved issue affects the current year’s audit approach.
Managing a Single Audit Successfully
The most successful Single Audits share several characteristics:
Preparation — Grant files are organized, the SEFA is reconciled, and time and effort documentation is complete.
Communication — The client and auditor maintain open, regular communication throughout the engagement.
Engagement — Management takes the audit seriously, allocates appropriate time, and responds to requests promptly.
Follow-through — Findings are addressed, and corrective actions are implemented as committed.
Treating the Single Audit as a partnership rather than an inspection produces better outcomes for everyone. The auditor gains the information needed to complete the engagement efficiently. The client gains assurance that federal funds are properly managed. And the organization maintains eligibility for future federal funding.
How Nova Tax & Accounting Services Can Help
At Nova Tax & Accounting Services, we conduct Single Audits under the Uniform Guidance for nonprofits, government entities, and other federal award recipients. Our approach emphasizes clear communication, efficient fieldwork, and practical recommendations that strengthen compliance and internal controls.
We also provide financial statement audits, reviews, and compilations, along with Form 990 preparation and nonprofit consulting.
For more information, visit https://novataxservices.com/audit-attestation-services/ or schedule a free consultation.