Preparing for Your Single Audit: A Guide for Legal Aid Nonprofits

The single audit is the most comprehensive federal compliance review a nonprofit will face. For legal aid organizations funded by the Legal Services Corporation (LSC), there is an added layer: LSC funds are treated as a major program regardless of spending level, which means the compliance testing is more rigorous than most organizations anticipate on the first pass.

The Updated Threshold and What It Means

The Office of Management and Budget raised the single audit threshold for federal expenditures from $750,000 to $1,000,000 as part of its April 2024 revisions to the Uniform Guidance. The new threshold applies to fiscal years beginning on or after October 1, 2024, meaning calendar-year organizations first encounter it in FY2025.

The threshold applies to total federal expenditures across all funding sources, not per grant. An organization receiving $600,000 from LSC and $500,000 from federal pass-through awards through a state agency has expended $1,100,000 in federal funds and is subject to single audit requirements regardless of whether any single award exceeds the threshold on its own.

For LSC-funded legal aid organizations, the threshold question is almost always answered the same way. LSC’s $560 million in annual grant appropriations means most grantees are well above $1,000,000 in federal expenditures before accounting for any other federal funding sources.

How LSC Funds Interact With Major Program Determination

Under the Uniform Guidance, the auditor uses a risk-based approach to determine which federal programs receive major program testing. Programs above a certain percentage of total federal expenditures are automatically major. Others are selected based on risk assessment.

LSC funds bypass that process entirely. The LSC OIG Audit Guide requires that LSC funds be treated as a major program in every grantee single audit, regardless of the risk-based threshold calculation. That means the compliance testing applied to LSC grants is as rigorous as any program in the portfolio, every year, without exception.

The practical implication is that an organization can’t rely on favorable major program determination to reduce the scope of LSC-related compliance testing. The auditor will test LSC compliance fully, covering timekeeping, fund balance, cost allocation and the requirements that apply to every LSC grantee audit.

Building the Schedule of Expenditures of Federal Awards

The Schedule of Expenditures of Federal Awards, commonly called the SEFA, is the foundation of the single audit. It lists every federal award the organization expended during the audit period, including the federal agency, the Assistance Listing number, the program name, the pass-through entity if applicable and the total expenditures for the year.

Errors in the SEFA are among the most common findings in single audits. Awards get omitted. Pass-through funding gets misclassified as direct federal funding. Expenditure totals don’t agree with the general ledger. Each of those errors creates a finding that requires a corrective action plan and follow-up in the next audit cycle.

Building an accurate SEFA requires tracking federal award activity throughout the year, not assembling it from memory at year end. Every federal award should be identified at intake, coded consistently in the general ledger and reconciled to the SEFA before the auditor begins fieldwork. Organizations that treat the SEFA as an auditor deliverable rather than an internal document routinely discover errors under time pressure when they’re hardest to fix.

What Auditors Test and How to Prepare for It

The single audit has two components. The first is the financial statement audit, which covers whether the organization’s financial statements are presented fairly in accordance with generally accepted accounting principles. The second is the compliance audit, which tests whether the organization complied with the requirements of its federal awards.

For LSC grantees, the compliance audit covers fund segregation, timekeeping, cost allocation, fund balance monitoring and eligibility determinations. The auditor tests these areas through document review, transaction sampling and interviews with staff responsible for compliance functions. Understanding which of these areas most commonly produce findings can help organizations prioritize their preparation; a breakdown of the most common LSC grant compliance mistakes and how to avoid them is a useful reference before fieldwork begins.

Auditors also evaluate whether internal controls are appropriately designed and operating effectively to ensure compliance with federal requirements, not simply whether required documentation exists. The organizations that move through single audit fieldwork most efficiently are the ones whose documentation is organized before the auditor arrives. Timekeeping records filed by pay period. Cost allocation policies in writing and applied consistently. Bank reconciliations completed monthly. SEFA reconciled to the general ledger. Internal control documentation that reflects how the organization actually operates.

Reconstructing documentation during fieldwork slows the audit, increases costs, and often leads auditors to expand their testing.

The Submission Deadline and Corrective Action Timeline

Completed single audit reports must be submitted to the Federal Audit Clearinghouse within 30 days of receiving the auditor’s report, or nine months after the fiscal year end, whichever comes first. For LSC grantees, the LSC OIG also requires audit submission within 120 days of fiscal year end, which is typically the binding constraint.

When the audit identifies findings, a corrective action plan is required. For LSC findings specifically, that plan must be submitted to LSC within 30 days of the audit report submission. The corrective action plan needs to address the root cause of each finding and describe specific steps the organization will take to prevent recurrence. Plans that describe what happened without explaining what changes will prevent it from happening again don’t satisfy the requirement.

Treat the Single Audit as a Year-Round Function

The organizations that consistently produce clean single audits don’t prepare for them. They maintain the systems, documentation and controls that make preparation unnecessary. The SEFA is current. The timekeeping records are complete. The cost allocation policies are written, followed and consistently applied. When the auditor arrives, the work is already done.

James Moore’s nonprofit team works with LSC-funded legal aid organizations on single audit preparation, compliance systems and the documentation practices that support clean findings year after year. Contact us when you want to get ahead of the next audit cycle rather than react to it.

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