October 8, 2026
Nonprofit organizations that receive federal funding often take on added financial and compliance responsibilities. For nonprofits, state and local governments, and other federal award recipients, those responsibilities may include undergoing a single audit. Being prepared for a single audit is a year-round process, and organizations that take a proactive approach are generally better positioned when the audit begins. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.
A single audit is an independent audit required for organizations that spend $1 million or more in federal awards during a fiscal year. Importantly, the threshold increased from $750,000 to $1 million for fiscal years beginning on or after October 1, 2024.
For organizations that meet the threshold, the audit combines a traditional financial statement audit with additional testing of federal programs and internal controls. The requirements are established under the Code of Federal Regulations Part 200, commonly known as the Uniform Guidance. Auditors also follow government auditing standards (GAGAS) and use the OMB Compliance Supplement when conducting the engagement.
Many organizations have questions about the threshold. The $1 million threshold is based on federal awards spent during the fiscal year. Funding may be received directly from a federal agency or indirectly through a pass-through entity, such as a state or local government. Organizations should maintain clear records of federal expenditures so they can determine whether they are approaching the threshold.
Those nearing $1 million in federal expenditures will want to carefully monitor spending throughout the year. Increased spending under an existing award or additional pass-through funding late in the year can create a single audit requirement that was not anticipated.
A single audit generally includes several stages.
Preparation and planning — The organization prepares its financial statements, Schedule of Expenditures of Federal Awards (SEFA), grant records, reconciliations, policies, and other requested documentation. The auditor reviews the organization’s federal award activity and plans the engagement.
Risk assessment and major program selection — The auditor uses a risk-based approach to determine which federal programs will receive detailed testing. The auditor also identifies the compliance requirements that apply to those programs.
Fieldwork and testing — The auditor tests financial information, transactions, internal controls, along with applicable federal requirements. Staff members may need to provide additional records or answer questions throughout the testing process.
Finalizing the report — The auditor will communicate any findings to management. Depending on the severity, these issues may be documented within a Corrective Action Plan (CAP) that is included in the official submission. This does not automatically reduce the federal funding available; however, the organization is responsible for following the plan and implementing improvements within the stated timeline. The final reporting package, with the SEFA, is then completed and submitted to the Federal Audit Clearinghouse (FAC).
The process may take several weeks or months depending on the organization. Early discussions with the auditor can help determine whether a single audit is likely to be required and what preparation is most helpful in the process.
How to Prepare for a Single Audit
Preparation throughout the year can make the audit process more efficient. Organizations will first want to update the SEFA regularly by tracking federal award spending and reconciling the schedule to the general ledger and other financial records. Errors or omitted programs can create issues later in the audit process.
Accurate records also depend on strong supporting documentation. Organizations should be able to show how federal funds were spent and why the costs were allowable under the award. Depending on the program, that may include grant agreements, invoices, payroll information, approvals, procurement records, reimbursement requests, and required reports. Keeping those records complete and readily accessible can make audit testing less disruptive for the staff members involved.
Written procedures should reflect current Uniform Guidance requirements. Areas to review may include procurement, cost allocation, approval procedures, segregation of duties, financial reporting, and record retention. Organizations should also confirm that internal controls are being followed by staff members throughout the year.
Program managers, grant administrators, procurement personnel, payroll staff, and others may create records or perform controls that become part of audit testing. Staff members responsible for these activities should understand the requirements and receive ongoing training. Taking these steps, along with conducting self-assessments or regular internal reviews, can help organizations enter the single audit process better prepared.
Contact Us
Federal funding is often mission-critical to programs and communities. A year-round approach to federal award compliance can help organizations prepare for the single audit process and strengthen financial practices. Working with an experienced auditor can also help organizations navigate the specialized federal requirements involved. If you have questions about the information outlined above or need assistance with your next single audit, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.