Receiving a large federal grant is an exciting opportunity for a nonprofit organization. It can fund new programs, expand your impact, and strengthen your ability to serve your community.
However, additional funding also introduces new compliance responsibilities that organizations should begin addressing immediately—not after the fiscal year has ended.
If your organization expends more than the applicable federal threshold in federal awards during a fiscal year, you’ll likely be required to undergo a Single Audit. For many growing nonprofits, this is their first experience with the additional compliance requirements that accompany federal funding.
The good news? A Single Audit doesn’t have to be overwhelming.
With the right accounting systems, internal controls, and documentation in place, your organization can approach the audit with confidence instead of scrambling to prepare.
At Bay Business Group, we help nonprofits establish the financial processes that support grant compliance, prepare for Single Audits, and strengthen long-term financial management.
What Is a Single Audit?
A Single Audit is a specialized audit required for organizations that expend significant amounts of federal funding during a fiscal year.
Unlike a traditional financial statement audit—which evaluates your organization’s financial statements as a whole—a Single Audit focuses specifically on your federal awards and whether your organization complied with the applicable federal requirements.
It’s helpful to think of a Single Audit as an audit within an audit. While the financial statement audit examines the nonprofit’s overall financial reporting, the Single Audit evaluates how federal grant funds were managed, documented, and monitored.
While receiving additional funding is exciting, it also introduces new compliance responsibilities that organizations should begin addressing immediately—not after the fiscal year has ended.
Read More: Federal Grant Tracking for Nonprofits
When Does a Nonprofit Need a Single Audit?
Organizations that expend more than the federal threshold in federal awards during a fiscal year are generally required to undergo a Single Audit under Uniform Guidance. Many nonprofits first encounter this requirement after receiving a significant federal grant or multiple federal awards that collectively exceed the threshold (currently, that threshold is one million dollars).
It’s important to note that the federal thresholds may change over time, and it’s a good practice to confirm the applicable threshold for the fiscal year with their CPA or auditor.
What Auditors Review During a Single Audit
A Single Audit goes beyond reviewing financial statements.
Auditors typically evaluate whether your organization has appropriate internal controls and whether federal funds were spent in accordance with grant requirements.
Areas often reviewed include:
- Grant expenditure tracking
- Personnel cost documentation
- Timekeeping for grant-funded employees
- Procurement policies
- Approval processes
- Supporting documentation for expenditures
- Financial reporting submitted to federal agencies
- Monitoring of subrecipients, when applicable
Internal Controls Make the Difference
One of the most effective ways to prepare for a Single Audit is by building strong internal controls. These controls help ensure that federal funds are spent appropriately while reducing the likelihood of audit findings.
Examples include:
- Separating financial responsibilities so one individual doesn’t control an entire transaction
- Requiring documented approvals for purchases and grant reports
- Maintaining written procurement policies
- Tracking employee time charged to federal grants
- Retaining invoices and supporting documentation
- Monitoring subrecipients receiving grant funds
Nonprofit leaders might choose to work with their CPA or an outsourced accounting partner to develop policies and strengthen these processes, but at the end of the day, the nonprofit itself must consistently enforce and follow those procedures throughout the organization.
Frequently Asked Questions About Single Audits
Is a Single Audit the same as a financial statement audit?
No. A financial statement audit evaluates your organization’s financial statements as a whole. A Single Audit includes that audit but also focuses specifically on compliance with federal grant requirements and the effectiveness of related internal controls.
What is the most common cause of audit findings?
One of the leading issues organizations struggle with is inadequate documentation—particularly for payroll costs charged to federal grants. Oftentimes, this is a result of not implementing compliance procedures early enough in the process.
Can an accounting system help us prepare?
Absolutely. A well-designed accounting system should support grant-specific tracking, fund accounting, documentation, approval workflows, and meaningful financial reporting throughout the year.
How Bay Business Group Helps Nonprofits Prepare for a Single Audit
Preparing for a Single Audit isn’t something that should begin a few weeks before your auditors arrive. It’s an ongoing process that starts with accurate bookkeeping, strong internal controls, and consistent documentation.
Bay Business Group helps nonprofits prepare for Single Audits in the following ways:
- Track federal grant expenditures
- Strengthen internal controls
- Develop grant accounting procedures
- Improve timekeeping documentation
- Prepare board-ready financial reports
- Support grant compliance throughout the year
- Provide outsourced accounting and fractional CFO services tailored to nonprofit organizations
We can also coordinate with your auditors to help make the process more efficient. Our goal is to help clients build financial systems that support compliance long before the audit begins.
Prepare Before the Audit Begins
A successful Single Audit isn’t the result of last-minute preparation—it’s the result of good financial management throughout the year.
By establishing strong accounting systems, documenting grant activities, and implementing effective internal controls from the beginning, your nonprofit can reduce audit findings, strengthen grant compliance, and position itself for future funding opportunities.
If your organization is preparing for its first Single Audit or wants to improve its federal grant compliance, Bay Business Group can help. Reach out to us today to set up a free, 30-minute consultation to learn how we can help manage your federal funding so you can stay focused on your mission: