For organizations that receive federal funding, the Single Audit requirement represents one of the most significant compliance obligations they face. In 2024, the Office of Management and Budget (OMB) raised the Single Audit threshold from $750,000 to $1,000,000, effective for fiscal years beginning on or after October 1, 2024 . This change brought relief to many smaller organizations but also created confusion about which entities must undergo the rigorous audit process. What Is the Single Audit Threshold? The Single Audit threshold determines whether a non-federal entity—including nonprofit organizations, state and local governments, and other federal award recipients—must obtain a Single Audit for its fiscal year. Under 2 CFR 200.501, any entity that expends $1,000,000 or more in federal awards during its fiscal year must have either a Single Audit or, in limited single-program situations, a program-specific audit conducted for that year . The threshold is based on federal awards expended during the fiscal year, not on awards received. This distinction is important because organizations may receive awards in one year but expend them over multiple years. The threshold applies to the total amount of federal funds actually spent, not the total amount awarded or drawn down. Who Is Affected by the Single Audit Threshold? The Single Audit requirement applies to all non-federal entities that expend federal awards, including: Nonprofit organizations (including 501(c)(3) organizations, foundations, and charities) State and local governments Public housing authorities Colleges and universities Healthcare providers Tribal organizations For-profit entities (only when explicitly required by the award or agency) For most for-profit businesses, the Single Audit requirement does not automatically apply. However, some federal awards or agencies may specifically require a Single Audit or program-specific audit as a condition of the award. What a Single Audit Includes A Single Audit is more comprehensive than a standard financial statement audit. It combines: A Financial Statement Audit: Examines the accuracy of your financial statements and internal controls over financial reporting. A Compliance Audit: Assesses whether your organization has followed the specific rules, regulations, and terms of each federal award or program under the Uniform Guidance. This means the audit is not just about the numbers, but also about how federal funds were managed, documented, and reported. The audit includes testing of internal controls over compliance and compliance testing for major federal programs . 2026 Single Audit Updates OMB published a proposed rewrite of 2 CFR Part 200, the Uniform Guidance, in the Federal Register on May 29, 2026 . The proposal does not lower the Single Audit threshold or reverse the 15% de minimis indirect cost rate. Both remain in effect at $1,000,000 of federal awards expended and 15% of modified total direct costs . The proposal instead targets broader grant administration policy, including pre-issuance review of selected discretionary awards and expanded agency termination authority. The audit framework in Subpart F is being refined, not rebuilt . If finalized, the proposed rule contemplates an effective date as early as October 1, 2026, which would align with the start of the federal fiscal year . How to Determine If You Need a Single Audit To determine whether your organization needs a Single Audit: Calculate total federal awards expended during your fiscal year. This includes all federal grants, contracts, cooperative agreements, and other federal assistance. **Compare the total to the $1,000,000 threshold.** If the total equals or exceeds $1,000,000, a Single Audit is required. If you are below the threshold, no Single Audit is required, but you may still need to comply with other audit requirements from state or local governments, grantors, or funders. For HUD multifamily entities, be aware that the REAC FASS-MF system still validates against the old $750,000 threshold, creating a compliance gap . Entities expending between $750,000 and $999,999 must navigate this system issue carefully. How We Can Help At Nova Tax & Accounting Services , we provide Single Audit (Uniform Guidance) services for nonprofits, government entities, and other federal award recipients. Our team helps you prepare for a smooth Single Audit experience, organize your grant documentation, and address any findings or questioned costs. We also assist with pre-audit assessments to identify and address potential issues before the audit begins. Schedule your free consultation today to discuss your Single Audit needs.
The 2026 session of the Virginia General Assembly brought significant changes to the Commonwealth’s tax landscape. From new local sales tax options to educator deductions and tobacco licensing shifts, these changes affect individuals, families, and businesses across Virginia. This comprehensive guide breaks down each new law, explains what it means for you, and provides practical guidance for navigating the updated tax environment. Additional 1% Local Sales Tax Option: “1 for Schools” One of the most significant changes enacted in 2026 is the expansion of the 1% local sales tax option to all Virginia localities . Previously, only nine cities and counties had the authority to place a local sales tax measure on the ballot. The new law allows any locality to increase its sales tax rate by 1% if approved by voters in a referendum . What the Tax Funds The additional revenue must be used exclusively for school construction or renovation projects . Some localities can also use the funds for public transportation purposes . The dedicated funding source cannot be applied to existing debt service for projects started before the tax takes effect . However, it can help pay down new debt quicker, strengthening local governments’ commitment to long-term financial stewardship. Items Exempt from the Increase The 1% local option increase does not apply to : Food purchased for home consumption – groceries will continue to be taxed at the reduced rate of 1% statewide Essential personal hygiene products – these products are also exempt from the additional local tax This exemption structure means that approximately 20% of all retail spending remains at the lower rate . The structure is designed to shield essential household purchases from the additional tax burden. Local Impact: Chesterfield County Example Chesterfield County voters will decide on the “1 for Schools” tax on November 3, 2026 . If approved, the dedicated funding would support multiple school projects: New elementary schools to reduce overcrowding and eliminate reliance on classroom trailers Middle school replacements and completions High school additions to consolidate campuses Pre-K expansion to serve up to 150 additional students Recurring funding for major building systems and infrastructure renewals The Board of Supervisors has indicated that if voters approve, the county would consider reducing the real estate tax rate by 2 cents and the personal property tax rate by 10 cents, offsetting the impact of the new sales tax while reducing the overall tax burden . Who Bears the Cost An important aspect of the sales tax structure is that approximately 30% of the revenue generated would come from visitors and people traveling through participating localities . This means the tax burden is shared with non-residents who utilize local infrastructure and services. Reinstatement of the Eligible Educator Expense Deduction Starting with Tax Year 2026 returns, qualified taxpayers can deduct up to $500 in eligible educator expenses . This reinstatement provides meaningful tax relief for Virginia’s teachers, instructors, counselors, principals, and aides. Who Qualifies An eligible educator is an individual who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year . This mirrors the federal definition of an “eligible educator” for purposes of the educator expense deduction. What Expenses Qualify Qualified expenses include amounts paid or incurred for : Books and supplies Computer equipment, including related software and services Other equipment Supplementary materials used in the classroom For courses in health and physical education, expenses for supplies are qualified only if related to athletics. The expenses must be unreimbursed—if the educator was reimbursed by their school or another source, those expenses are not eligible for the deduction. Interaction with Federal Law For federal income tax purposes, eligible educators may deduct up to $250 of unreimbursed qualified expenses ($500 for married couples filing jointly where both are educators) . The Virginia deduction allows up to $500 for each qualified educator, providing additional state-level relief beyond what is available at the federal level. The deduction is available to educators who claim the standard deduction or itemize their deductions—it is an “above-the-line” deduction. Retail Tobacco Products Licensing Beginning October 1, 2026, retail tobacco products licensing, including for liquid nicotine and nicotine vape products, will be administered by the Virginia Alcoholic Beverage Control Authority (Virginia ABC) . This represents a significant shift from the previous Department of Taxation oversight. What This Means for Businesses Retail tobacco permits will be required on October 1, 2026 . The sale of tobacco products after this date without a permit may result in misdemeanor criminal charges . This applies to all persons permitted to sell any retail tobacco product, including: Persons holding a Retail Sales and Use Tax Exemption Certificate for Stamped Cigarettes Purchased for Resale Retail dealers of liquid nicotine and nicotine vapor products Persons holding any other similar permit issued by the Department of Taxation Annual Renewal Fees The annual renewal fee on retail tobacco permits will be in an amount set by the Virginia ABC Board . All retail tobacco permittees remain subject to state merchants’ license taxation, state restaurant license taxation, and other state or local taxation applicable to retail tobacco products . Enforcement and Compliance The legislation also requires that the Office of the Attorney General conduct underage buyer operations for licensed dealers at least once every 24 months . This enhances compliance enforcement and helps prevent illegal sales to minors. Businesses should be aware that these provisions require reenactment by the 2027 Session of the General Assembly to remain effective , so continued attention to legislative developments is essential. Innocent Spouse Relief Effective July 1, 2026, Virginia taxpayers may apply for relief from tax liability arising from a joint return filed with a spouse or former spouse . How the Relief Process Works If you believe your spouse or former spouse should be held responsible for all or part of a tax due from a joint tax return you filed together, you may apply for relief from the tax liability using Virginia’s Offer in Compromise Doubtful Liability process . The Department of Taxation may grant relief for a spouse who meets the qualifications for relief under §
Accurate business financial statements are the foundation of sound decision-making, lender confidence, and regulatory compliance. For businesses in Virginia, understanding when and why financial statement audits are required—and how to prepare for them—is essential for growth and stability. This guide explores the role of financial statements in business operations, audit requirements for Virginia businesses, and best practices for maintaining accurate financial records. The Importance of Business Financial Statements Financial statements provide a structured view of a business’s financial position, performance, and cash flow. The three primary financial statements—balance sheet, income statement, and cash flow statement—are used by management, lenders, investors, and regulators to evaluate business health. According to audit standards, management is responsible for the preparation and fair presentation of financial statements in accordance with applicable accounting standards . This includes designing and maintaining internal controls, selecting appropriate accounting policies, and making reasonable estimates . When Are Business Financial Statement Audits Required? Audit requirements for Virginia businesses vary based on industry, regulatory obligations, and financing needs. Regulatory Requirements Money Transmitters – Under Virginia Code § 6.2-1939, effective July 1, 2026, money transmitter licensees must file audited financial statements with the Virginia State Corporation Commission within 90 days after the end of each fiscal year . The audited financial statements must be prepared by an independent certified public accountant in accordance with generally accepted accounting principles . Government Contractors – Businesses contracting with government agencies may be subject to audit requirements, including DCAA (Defense Contract Audit Agency) compliance . Government contractors often require audited financial statements to demonstrate financial stability and compliance with contracting regulations . Public Companies – Businesses with publicly traded securities must comply with SEC filing requirements, including audited annual financial statements . Lender and Investor Requirements Financial institutions and investors frequently require audited financial statements as a condition of financing . Loan agreements often specify the level of assurance required, which can increase as credit needs rise. A business may start with a compilation or review, but as it grows and seeks larger lines of credit, the lender may request audited financials. Voluntary Audits for Credibility Even when not required, many businesses choose to undergo voluntary audits to build credibility with stakeholders, prepare for a sale, or strengthen internal controls. As one tax and consulting firm notes, effective tax preparation and planning can help businesses proactively manage tax issues, including understanding how upcoming business opportunities impact tax status . Audit vs. Review vs. Compilation: Understanding the Levels of Assurance Service Level of Assurance Key Procedures Best For Compilation None Organizes financial data Internal use, tax filing Review Limited Inquiries & analytical procedures Banks, investors, board reporting Audit Reasonable Testing, confirmation, controls verification Large loans, regulatory compliance, public trust Auditors performing an audit in accordance with Generally Accepted Auditing Standards exercise professional judgment and maintain professional skepticism throughout the audit . They identify and assess risks of material misstatement, whether due to fraud or error, and design and perform audit procedures responsive to those risks . Preparing for a Business Financial Statement Audit Organize Your Financial Records – Ensure all financial records are complete and organized. This includes bank statements, invoices, receipts, payroll records, and supporting documentation for major transactions. Review Internal Controls – Auditors will assess internal controls relevant to the audit . Strong internal controls reduce audit costs and improve efficiency. Document Accounting Policies – Maintain clear documentation of accounting policies used and the reasonableness of significant accounting estimates made by management . Communicate with Your Auditor – Auditors are required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control matters . Virginia-Specific Financial Statement Considerations Audited Financials for Regulated Entities – Virginia regulates money transmitters and certain other industries, requiring audited financial statements for licensure . Pass-Through Entity Reporting – Virginia pass-through entities must file returns with the Virginia Department of Taxation, which relies on accurate financial statements for proper reporting . Under Virginia Code § 58.1-392, every pass-through entity doing business in Virginia, or having income from Virginia sources, shall make a return to the Department of Taxation . Local Business License Compliance – Many Virginia localities require business licenses and may request financial information as part of compliance . Richmond’s upgraded RVA Business Portal now offers enhanced document management and bill history features for business filers . Common Audit Findings for Virginia Businesses Inadequate Documentation – Missing receipts, invoices, or supporting documentation for transactions. Weak Internal Controls – Lack of segregation of duties or formal policies. Revenue Recognition Issues – Improper timing or classification of revenue. Expense Categorization Errors – Misclassifying expenses between business and personal accounts. How Nova Tax & Accounting Can Help At Nova Tax & Accounting Services , we provide audit and assurance services for businesses and organizations across Virginia and Washington DC. Our team conducts financial statement audits, reviews, and compilations designed to meet your specific reporting requirements. We also provide accounting and bookkeeping services to help you maintain accurate records and prepare for audits. Schedule your free consultation today to discuss your business financial statement needs.