Single Audit

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What Is A Single Audit?

A Single Audits is an audit that covers the financial and compliance needs of public or private nonprofit higher educational institutions, nonprofit organizations, Indian tribes, and state and municipal governments. They have a public interest component and are usually conducted by an independent auditor.

The purpose of this audit is to verify that the state is adhering to all relevant guidelines and rules for each grant award and that it is making appropriate use of its federal grants. As part of their administrative duties, federal agencies rely on them to ascertain whether non-federal entities' actions comply with the terms of federal grants.

What Is Single Audit?

A single audit usually covers the financial transactions of a non-federal entity with an annual federal fund of $750,000 or more.
It improves accountability and openness in the administration of government funds.
It encourages the responsible and effective use of tax dollars by assisting government organizations and the general public in developing trust in the administration of federal grants.
An independent auditor looks at the recipient's financial statements and legal and regulatory compliance in a single audit.

Single Audit Explained

A single audit covers the organization's financial statements and federal awards in an audit of a non-federal body that spends $750,000 or more in federal funds in a single year. It was formerly known as the OMB Circular A-133 audit.

These companies must have operations that require at least $750,000 in government aid (sometimes referred to as federal funds, grants, or awards). Independent auditors that the auditees have hired or otherwise arranged conduct such audits. Foreign firms and for-profit businesses are exempted from single audit requirements unless they are necessary because of special circumstances. A single audit of an auditee is carried out following the end of their fiscal year.

The Federal Audit Clearinghouse (FAC) must receive single audit submission report packages no later than 30 calendar days (earliest date) following the receipt of an auditor's report. It could also be within nine months following the auditee's fiscal year-end. Single audit submission of reports applies to any program that grants federal financial assistance (e.g., cooperative agreements, grants, direct payments for specified use awards, and loans).

The three sections of the Single Audit report are the financial statements, the auditor's section, and the auditee's portion. The basic financial statements, notes, supplemental data, management analysis, and the independent auditor's report are all included in the financial statements section. The auditor's section comprises reports concerning financial statements, federal financial aid programs, compliance, conclusions, and questioned costs associated with internal control. The portion about the auditee of the single audit report comprises a timeline of expenses, corrective action plans, previous audit results, and other details, including pass-through funds, loan activity, and balances.

Requirements

Some of the requirements of the audit are as follows:

Recipients receiving federal funds worth more than $750,000 or more during their fiscal year must undergo a Single Audit.
An independent auditor must conduct the audit in accordance with Generally Accepted Governmental Auditing Standards (GAGAS).
This type of audit does not prohibit the audit of federal agencies. In other words, Federal agencies can still audit recipients, specific awards, or programs alongside this audit.

Examples

Let us check out these examples to get a better idea:

Example #1

Suppose ABC Private Limited, a healthcare company, has voluntarily undergone a Single Audit to ensure compliance with regulations and grant requirements. The company receives substantial federal funding for research and development projects, exceeding $750,000 in its fiscal year. ABC Private Limited recognizes the importance of transparency and accountability in managing federal funds, demonstrating to stakeholders that they are using the funds appropriately and adhering to regulations. The company also aims to enhance its reputation and credibility within the healthcare industry by ensuring fair financial statements and compliance with generally accepted accounting principles.

The audit also helps identify areas for improvement in internal controls over Federal programs, strengthening processes, mitigating risks, and ensuring effective utilization of federal funds. ABC Private Limited's pursuit of a single audit-for-profit entity aims to meet regulatory requirements, enhance transparency and accountability, build credibility, and identify opportunities for internal control enhancements, upholding its commitment to responsible financial management and maintaining its standing as a reputable organization in the healthcare sector.

Example #2

The City-Parish had to undergo an annual single audit. In 1810, the Parish of East Baton Rouge was founded as a division of the West Florida Republic. After Louisiana was admitted to the Union in 1812, the Parish became a local political unit of both the State of Louisiana and the United States. As specified under the Single Audit Act of 1996 rules, Budget's 2 CFR Part 200 (Uniform Guidance) and the US Office of Management, the city provides police and emergency medical services along with public transportation, economic development, infrastructure maintenance facilities, etc.

Benefits

Some of the benefits of the audit are as follows:

This audit guarantees the responsible and appropriate use of federal funding.
It aids in preventing fraud detection, waste, and improper use of public funds.
The information collected regarding a single audit for profit entity will help make decisions on corrective actions easier.
It demonstrates adherence to legal obligations as well as grant criteria.
It increases accountability and transparency in the administration of federal funds.
The audit increases public, government, and stakeholder trust in the recipient's programmatic and financial integrity.

Single Audit vs Yellow Book Audit vs Regular Audit

In auditing, there are three types of audits that one mostly commonly comes across - single, yellow, and regular audit. However, they share a set of dissimilarities, which have been mentioned as follows:

Points	Single Audit	Yellow Book Audit	Regular Audit
Concept	It is an audit that focuses on recipients of federal grants, examining compliance with grant requirements and assessing financial and programmatic aspects.	They are standards or guides for carrying out financial and performance audits.	Refers to audits conducted by independent auditors on financial statements of businesses or organizations.
Purpose	Ensures proper use of federal funds, detects and prevents fraud, promotes transparency and accountability.	Deals with Standards for Attestation Engagements and Reviews of Financial Statements, Fieldwork Standards for Performance Audits Chapter, Reporting Standards for Performance Audits, etc.	Assesses the fairness and accuracy of financial statements and assures shareholders.
Objective	Evaluates compliance with grant requirements and regulations for recipients of federal grants.	Conducts financial audits of government organizations or programs and business entities receiving financial assistance from the federal government.	Primarily focuses on financial aspects, including examination of financial records transactions, and ensures compliance with accounting principles.

Frequently Asked Questions (FAQs)

1. What is the Single Audit Act?

A federal statute known as the Single Audit Act was passed in 1984. In addition to promoting accountability, uniformity, and transparency in the use of government funds, the Act sets procedures for audits of beneficiaries of federal grants.

2. Are single audits public information?

Single audits are regarded as public data. The Federal Audit Clearinghouse makes the audit reports—which include conclusions and recommendations—available to the general public. Exemptions may be there.

3. Are ARPA funds subject to a single audit?

Yes, single audit standards apply to money received under the American Rescue Plan Act (ARPA). The same rules that apply to other beneficiaries of federal grants must be followed by ARPA grantees as well, including the requirement that recipients have at least $750,000 in federal money.

4. Are for-profit entities subject to a single audit?

No, single audit requirements usually do not apply to for-profit businesses. Single audits mostly affect recipients of federal grants, which are usually state, and local governments, universities, charitable organizations, and other groups that get funding from the federal government.