Single Audit vs. Regular Audit: Key Differences

The single audit threshold just increased for the first time in over a decade. Organizations that spend federal dollars need to understand what this means for their compliance obligations. The distinction between a regular financial statement audit and a single audit determines not just your audit costs but also your reporting timeline, documentation requirements, and potential consequences if problems arise.

Understanding Regular Financial Statement Audits

A regular financial statement audit examines whether your financial records accurately present your organization’s financial position. The auditor reviews accounting records, tests transactions, and evaluates whether financial statements follow Generally Accepted Accounting Principles. This audit provides stakeholders like donors, lenders, and board members with confidence that your financial reporting is reliable.

The auditor assesses your internal controls over financial reporting. Are duties properly segregated? Do you have adequate approval processes? Can you demonstrate accurate and complete transaction recording? The financial statement audit tests samples of transactions throughout the year to verify your accounting processes work as intended. At the end, you receive an opinion letter stating whether financial statements present your financial position fairly.

In Florida, nonprofits with annual revenues or public contributions exceeding $1 million must obtain an audit. Organizations with contributions between $500,000 and $1 million need reviewed or audited financial statements. For many organizations, this regular financial statement audit sufficiently meets obligations and provides stakeholder assurance.

When Federal Funding Triggers Different Requirements

Once your organization expends $1 million or more in federal awards during your fiscal year, a single audit becomes mandatory. This threshold increased from $750,000 effective for fiscal years beginning on or after Oct. 1, 2024, under revisions to the Uniform Guidance. Federal awards expended include money received directly from federal agencies as well as funds flowing through pass-through entities like state governments.

The term single audit means satisfying audit requirements from multiple federal programs through one combined engagement. Rather than each federal agency requiring separate audits of specific individual programs, you undergo one audit covering all federal awards. This consolidated approach reduces organizational burden while maintaining oversight of federal spending.

A single audit contains two major components. First, it includes everything from a regular financial statement audit. Your financial statements still need to present your financial position fairly and follow accounting standards. Second, it adds an entirely separate compliance audit examining whether you followed federal laws, regulations, and specific terms governing each major federal program.

These audits must be performed under Government Auditing Standards (commonly called the Yellow Book standards) issued by the Government Accountability Office. These standards impose additional requirements beyond normal auditing standards, including stricter independence rules and expanded reporting on internal controls and compliance matters.

The Compliance Testing That Changes Everything

The compliance portion represents the most significant difference between a regular financial statement audit and a single audit. Auditors must test your adherence to federal requirements for programs designated as major programs. The determination of which programs qualify as major depends on both dollar amount expended and the auditor’s risk assessment.

Every single audit requires a Schedule of Expenditures of Federal Awards be presented. This schedule lists each federal program your organization participated in during the fiscal year, showing your organization’s funding source, program identifier (known as the Assistance Listing Number) and the amount spent during the year. Creating an accurate schedule demands detailed tracking throughout the year because you must identify the federal source of every expenditure, including funds received through a pass-through entity instead of directly from the federal agency.

The Office of Management and Budget publishes an annual Compliance Supplement that highlights the compliance areas auditors look at for major federal programs. These typically include allowable activities and costs, cash management procedures, eligibility determinations, equipment and real property management, matching requirements and reporting obligations.

Compliance testing involves more than just examining financial transactions. Auditors review procurement procedures to ensure competitive bidding requirements were met. They examine time and effort documentation to verify salary charges to federal programs are supported. They assess how you monitor subrecipients if you pass federal funds to other organizations. They check eligibility determinations for program participants to confirm only qualified individuals received services.

Each federal program has specific requirements that must be followed. The auditor must test enough transactions and procedures to form an opinion about whether you complied with requirements that could directly and materially affect each major program.

Practical Differences That Impact Your Organization

The differences in scope between a financial statement audit and a single audit create real implications. A regular audit might take a few weeks to complete. A single audit often requires significantly more time because of additional compliance testing. You’ll need to provide substantially more documentation; this includes not just financial records but also program files, policies and procedures, and evidence of compliance with specific federal requirements.

Your internal controls need to address both financial reporting accuracy and compliance with federal award requirements. This means documented policies for allowable costs, procurement procedures meeting federal standards, and systems tracking federal expenditures separately from other funds. The Schedule of Expenditures of Federal Awards must be prepared alongside financial statements, adding another layer of work.

Single audits must be submitted to the Federal Audit Clearinghouse within nine months after your fiscal year end or 30 days after receiving the auditor’s report, whichever comes first. The audit report goes to federal agencies, pass-through entities, and becomes public record. Any findings about noncompliance or control weaknesses get reported in a Schedule of Findings and Questioned Costs.

The consequences of audit findings differ substantially. In a regular audit, control weaknesses or accounting errors get communicated to management and the board. In a single audit, compliance findings and questioned costs become public record and can trigger corrective action requirements. Federal agencies could increase monitoring, withhold payments or require repayments, or (in serious cases) suspend your ability to receive future federal funding.

Prepare Your Organization Successfully

Strong preparation makes either type of audit go more smoothly, but single audits demand extra attention. Start by understanding which federal programs you participate in and their specific compliance requirements. Read award documents carefully. Many compliance failures happen because organizations don’t fully understand what federal programs require.

Maintain detailed documentation throughout the year rather than scrambling when the audit starts. Keep procurement files complete with evidence of competitive processes. Document time and effort for employees whose salaries are charged to federal programs. Retain eligibility determinations for program participants. Track federal expenditures separately so you can easily identify what was spent under each award.

Your accounting system needs capability to separately track federal expenditures by program. Many organizations use fund accounting or project codes to accomplish this. The key is producing a complete and accurate Schedule of Expenditures of Federal Awards without extensive manual work at year end.

Internal controls over compliance deserve as much attention as controls over financial reporting. Document your policies and procedures for federal programs and train staff who work with federal awards so they understand compliance requirements. Implement monitoring procedures to catch problems before they become audit findings.

Make the Right Choice for Your Situation

Understanding whether you need a regular audit or single audit starts with calculating your federal expenditures for the fiscal year. Remember, federal funds passed through state or local governments count toward the threshold. If you’re approaching $1 million in federal spending, start preparing for single audit requirements even before crossing the threshold.

Organizations that treat single audits as merely compliance burdens miss an opportunity. A well-executed single audit strengthens internal controls, improves documentation practices, and demonstrates to federal agencies and other funders that you’re a responsible steward of public resources. Strong audit results can enhance your ability to secure additional funding because grantors see you have systems managing federal awards properly.

If your organization receives federal funding or expects to receive federal awards, working with experienced professionals who understand both financial reporting and federal compliance requirements makes a significant difference. Contact a James Moore professional to discuss your specific situation and ensure your audit approach aligns with your funding sources and organizational needs.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.