What is a Single Audit? A Guide for Nonprofit Organizations

You might think your nonprofit is too small or mission‑driven to worry about federal compliance audits. But if your organization spends $1,000,000 or more in federal funds in a fiscal year, you are required to undergo what is known as a single audit. For many nonprofit leaders this comes as a surprise — and unfortunately, surprises in federal compliance often carry consequences.

The reality is that single audits are not just for large national organizations. Local nonprofits receiving federal grants, managing disaster relief funds or working with pass‑through entities may all fall under this requirement.  Failing to undergo a single audit when required could jeopardize current or future grant funding.

In this article, we’ll walk through exactly what a single audit is, when it applies and how your nonprofit can prepare for it. If federal grants are part of your funding picture — even if you are receiving them from a more local government or nonprofit — this is something your finance team needs to understand in detail.

 

 

Understanding the Single Audit Requirement

Let’s start with the basics. A single audit is a comprehensive review required by the Office of Management and Budget (OMB) under the Uniform Guidance (2 CFR Part 200, Subpart F) for any nonprofit or non‑federal entity that expends $1,000,000 or more in federal awards during a single fiscal year.

The term “single” reflects that the audit combines two key components: a financial statement audit and a compliance audit of federal award activity.

The $1,000,000 threshold is based on actual expenditures, not just awards received. That means both direct federal funding and funds passed through another entity count toward the threshold. If your organization’s total federal expenditures hit $1,000,000 or more in a fiscal year, you trigger the requirement.

Nonprofits that commonly meet this threshold include human services organizations funded by HHS or HUD, educational nonprofits with Department of Education grants, housing programs, arts nonprofits receiving federal awards (like funding from the National Endowment of the Arts, or NEA), and disaster ‑relief organizations reimbursed by FEMA.

One important component of the single audit is the Schedule of Expenditures of Federal Awards (SEFA). This schedule lists all federal awards and is a critical starting point for the audit.

For more background, you can refer to the GAO’s Yellow Book standards, which guide government and nonprofit audits nationwide.

Who Needs a Single Audit and What Triggers It

Not every nonprofit that receives federal funding needs a single audit. The requirement is triggered only when total federal expenditures reach $1,000,000 or more during your fiscal year.

Here’s a breakdown of how that works in practice:

• If your nonprofit receives a federal grant of $900,000 and spends $700,000 during the fiscal year, you are not yet subject to a single audit.
• If your organization then receives a second federal award and spends an additional $350,000 (bringing total federal expenditures to $1,050,000) in that same year, you have now crossed the applicability threshold and must comply.

You must track both direct federal awards and pass‑through awards received from states or other intermediary entities. These all count toward the threshold.

Once your organization meets the threshold you must prepare a SEFA. The SEFA includes:

• The federal agency providing the funds
• The passthrough entityif applicable or denoting it’s direct from the federal agency
• The assistance listing number (formerly CFDA number)
• Amounts received and expended, including amounts passed through to subrecipients (this must be presented as a separate column on the face of the SEFA if applicable)
• Program titles and grant cluster identifiers, as applicable

This schedule is foundational for your auditor to determine which of your programs are considered “major programs” for testing under the Uniform Guidance.

For a deeper look into how your organization can manage these thresholds and schedules, visit our Nonprofit Services page.

 

 

What Happens During a Single Audit

A single audit is more rigorous than a standard financial audit. The process examines both your financial statements and your compliance with federal regulations tied to your awards.

Here’s what to expect:

Financial Statement Audit: The auditor verifies that your financial statements are fairly presented and prepared in accordance with generally accepted accounting principles (GAAP). This covers revenue, expenses, assets, liabilities and internal controls.

Federal Program Compliance Audit: Using your SEFA, the auditor identifies which programs qualify as major programs based on thresholds, risk assessments, and guidelines in the OMB Compliance Supplement. Then your organization is tested on core compliance areas such as:

• Allowable costs and activities
• Eligibility and matching requirements
• Procurement and suspension/debarment rules
• Accuracy and timeliness of reporting
• Cash management
• Subrecipient monitoring
• At the end of the audit the auditor issues a report package that includes:
• An opinion on the financial statements and confirmation the SEFA aligns with them
• A report on compliance and internal controls for each major federal program
• Any findings on internal controls and questioned costs
• Your organization’s corrective action plan

This report is submitted to the Federal Audit Clearinghouse no later than 30 days after issuance or nine months after your fiscal year‑end (whichever is sooner).

To see the latest compliance requirements for your specific grants, visit the official OMB Uniform Guidance portal.

Common Nonprofit Pitfalls During a Single Audit

For many nonprofits, the single audit can feel overwhelming. With federal funding on the line, even minor missteps can carry major implications. Here are some common issues and how to avoid them:

Incomplete or inaccurate SEFA: The SEFA is the backbone of your audit. If it’s incomplete or mismatched to your general ledger, it triggers red flags. Ensure the schedule includes all federal expenditures, correct assistance listing numbers, and passthrough entities.

Weak or undocumented internal controls: Federal funders expect controls over spending, approval, procurement, and reporting. If controls are not properly documented and enforced your audit may list material weaknesses or significant deficiencies.

Insufficient subrecipient monitoring: If you pass federal funds to another entity, you must monitor their use of those funds. Collect audit reports, ensure their compliance and document your oversight. Many nonprofits overlook this.

Unclear documentation of allowable costs: Federal award costs must be necessary, reasonable, and properly supported. Auditors often flag expenses with unclear tie‑backs to approved grant activity.

Late or incomplete audit submissions: Single audit reports must be submitted timely. Missing the nine-month deadline can impact future single audits.

Errors in indirect cost rate application: Under the revised guidance, nonprofits without a negotiated rate may elect the de minimis rate of 15% of modified total direct costs (up from 10%). Misapplication can result in questioned costs.

How to Prepare Your Nonprofit for a Smooth Single Audit

The best time to prepare is well before your deadline. Whether your nonprofit is approaching the $1,000,000 threshold or already subject to a single audit, these steps will help.

Track your federal expenditures throughout the year. Instead of waiting until year-end, assemble and update your SEFA on a monthly or quarterly basis. That helps identify threshold crossing early and supports accurate audit preparation.

Document your internal controls. Formalize policies and procedures for all relevant processes, including expense approval, payroll allocations, and procurement. Train staff to follow them consistently. Auditors will evaluate both the design and effective implementation of controls.

Monitor your subrecipients. If you pass funds downstream, establish a monitoring plan. Review their audits, evaluate their compliance and keep documentation of your oversight activities.

Engage your auditor early. Choose an auditor experienced in nonprofit federal compliance and single audits. Meet early to align on documentation expectations, timing, and scope.

Prepare your board or audit committee. Your board should be aware of the single audit requirement and how it affects financial oversight. Use your audit or finance committee to monitor compliance progress.

Review the OMB Compliance Supplement annually. Each year the OMB issues a Compliance Supplement that outlines audit testing requirements by federal agency and program type.

Even organizations that fall below the new threshold should maintain strong internal controls and grant compliance practices. This will support future growth and audit readiness.

Avoid Surprises: How to Stay Compliant with Single Audit Rules

With the threshold increase to $1,000,000 for fiscal years beginning on or after Oct. 1, 2024, your nonprofit may no longer trigger a single audit requirement—but that doesn’t mean compliance demands fade. Accountability, transparency and proper stewardship of federal funds still matter.

At James Moore, we’re committed to helping nonprofits manage these evolving rules. If your organization is nearing the new threshold, has recently received new federal awards or simply wants to assess readiness, we can help.

Contact a James Moore professional to schedule a conversation. Together we’ll build the compliance foundation you need to focus on your mission rather than audit surprises. If your organization is nearing the single audit threshold, has recently received new federal awards or simply wants to assess readiness, we can help.

 

 

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