CARES Act and Single Audits
Feb 25, 2021
Many nonprofit organizations have received additional federal funding this past year as a result of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It is important to note that much of this funding has been received through another entity, such as state or county entities. Whether these funds were received directly from the U.S. Department of Treasury or another entity, the funds originated from the federal government and there are certain requirements that recipients must follow.
Will my nonprofit need a single audit?
A single audit is required when a non-federal entity spends $750,000 or more in federal grant funds in a fiscal year. If your nonprofit has spent more than $750,000 in federal funding during its fiscal year, including CARES Act funding , then your organization is required to have a single audit. The AICPA Government Audit Quality Center has clarified that PPP loans will not be subject to a single audit. However, funds under the EIDL program will be subject to single audit requirements.
What is a single audit?
The purpose of the single audit from the federal government's standpoint is to make sure the organization is compliant with the terms of the federal program from which the funds are being received. All federal funding should have a related Catalog of Federal Domestic Assistance (CFDA) number. The CFDA number for the funds your organization receives will help you know what terms you are required to comply with as part of receiving the federal funding. As your organization receives federal funding, it is important to know the related CFDA number and the compliance terms you are subject to. Fortunately, most of the CARES Act funding will fall under the same CFDA number no matter the source you receive the funds from.
A single audit will also focus on the internal controls over compliance. Some internal controls over compliance to consider are:
- Incorporating the risk of noncompliance with federal requirements into management's overall risk assessment
- Requiring proper policies to ensure the organization is compliant with federal requirements
- Segregating duties among personnel administering the related programs
- Designing effective controls to prevent and detect noncompliance
- Documenting processes related to how management monitors compliance
What does this mean for you?
If your organization is required to have a single audit, it is important to ensure you are ready for the audit. Noncompliance with federal awards or a lack of appropriate internal controls can lead to negative consequences, such as the repayment of funding.
What should you do now to prepare?
To help ensure that your single audit goes smoothly, make sure you are aware of the compliance requirements related to the federal funding you receive and that you have implemented the necessary processes, procedures, and controls. It is also important to incorporate the cost of a single audit into your organizations budget. The single audit adds additional auditing procedures and reporting requirements that will increase the cost of your annual audit.
Contact us with any questions you may have on single audit requirements. As nonprofit experts, we are ready to help you with any single audit needs you may have.
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