Single Audit

Before determining which federal programs to examine, the auditor must first determine, based on specific criteria, whether the recipient is a high-risk auditee or a low-risk auditee. A high-risk auditee is a recipient which has a high risk of not complying with federal laws and regulations, while a low-risk auditee is the exact opposite. The Uniform Guidance has set certain requirements a recipient must meet to be considered a low-risk auditee. This includes the following to be evaluated for each of the preceding two audit periods:[14]

• Single audits have been performed on an annual basis in prior years.
• The auditor's opinions on the financial statements and the Schedule of Federal Expenditures (discussed later) were unmodified.
• There are no material weaknesses identified.
• The auditor did not report a substantial doubt about the auditee's ability to continue as a going concern.
• None of the Federal programs had audit findings from any of the following in either of the preceding two audit periods in which they were classified as Type A programs:
  • Internal control deficiencies that were identified as material weaknesses in the auditor's report on internal control for major programs;
  • A modified opinion on a major program in the auditor's report on major programs; or
  • Known or likely questioned costs that exceeded five percent of the total Federal awards expended for a Type A program during the audit period.

The Uniform Guidance uses the high- and low-risk determination to regulate the dollar amount of federal expenditures to be audited. Although the actual work necessary for a Single Audit is established by the auditor, the OMB has set a limit for auditing high-risk and low-risk auditees. For high-risk auditees, the auditor is required to audit not less than 40% of all the federal assistance received during the year. For low-risk auditees, that limit is decreased to 20%.[15]

This determination affects the entire Single Audit because the auditor adjusts the scope of the audit accordingly. Since the auditor must provide an opinion to the federal government on whether the recipient and its programs complied with laws and regulations, the auditor performs sufficient procedures to confirm the opinion is correct.[16]

To determine which federal programs to audit under the compliance audit, federal assistance expended by the recipient (also called federal expenditures) during one year is identified by federal program name, Federal agency and CFDA number. These federal expenditures are then combined to determine the total amount expended during the year. Any recipient whose total federal expenditures during a year equal or exceed $750,000 requires a Single Audit.[17] If the recipient does not meet this threshold, a Single Audit is not required, although the recipient may elect to have a program-specific audit (an audit of a single federal program, without auditing the entire entity). Once this determination is performed, 2 CFR 200.518 requires that federal programs be categorized in two groups: Type A programs and Type B programs.[18]

A Type A program is any federal program within a recipient that meets the following criteria.

• If total federal awards expended during the audit period are greater than or equal to $750,000 and less than or equal to $25 million, then any program that expends more than $750,000 is Type A.
• If total federal awards expended during the audit period are greater than $25 million and less than or equal to $100 million, then any program that expends more than 3% of total federal awards is Type A.
• If total federal awards expended during the audit period are greater than $100 million and less than or equal to $1 billion, then any program that expends more than $3 million is Type A.
• If total federal awards expended during the audit period are greater than $1 billion and less than or equal to $10 billion, then any program that expends more than 0.3% of total federal awards is Type A.
• If total federal awards expended during the audit period are greater than $10 billion and less than or equal to $20 billion, then any program that expends more than $30 million is Type A.
• If total federal awards expended during the audit period are greater than $20 billion, then any program that expends more than 0.15% of total federal awards is Type A.

In other words, if a recipient expended a total of $25 million or less in federal assistance, then any single program which expended $750,000 or more is considered a Type A. If a recipient expended $30 million in federal assistance, then any single program which expended $900,000 or more (3% × $30 million) is considered a Type A program.[18] Special consideration must be given to large loan programs in determining the Type A threshold.

A Type B program is any single program which does not meet the Type A requirements.[19]

Example 1: The City of Example operates a Section 8 program, and expended $950,000 in Section 8 funds and $5,000,000 of total federal assistance during the year. Since this amount does not exceed $25,000,000, the Section 8 program is considered a Type A program because $950,000 exceeds the $750,000 threshold.

Example 2: Using the same data in Example 1 with the exception that the City of Example now expended a total of $30,000,000 in federal assistance, the Section 8 program would meet the Type A threshold because $950,000 is greater than $30,000,000 x 3% ($900,000).

Example 3: Using the same data in Example 1 with the exception that the City of Example now expended a total of $100,000,000 in federal assistance, the Section 8 program would not meet the Type A threshold because $950,000 is less than $3 million, and would be considered a Type B program.

After determining which programs are Type A and Type B, the Uniform Guidance requires that the auditor study and understand the operations and internal controls of such programs within the entity, and perform[20] and document[21] a risk assessment based on such study to determine whether each program has either a high or low risk of not complying with laws and regulations. Auditor may consider numerous factors including current and prior audit experience, good or poor internal controls over Federal programs, many or no prior audit findings, continuous or lack of oversight exercised by the federal government over the recipient, evidence or knowledge of fraud, and the inherent risk of the Federal program.[22]

For a Type A program to be considered low risk according to 2 CFR 200.518, it must have been audited as a major program at least once in the past two years and must not have had:[18]

• Material weaknesses in internal control
• A modified opinion in the audit report
• Known or likely questioned costs exceeding 5% of total federal award expenditures

For any Type A program considered to be a high risk of not complying, the Uniform Guidance requires that the auditor to perform a compliance audit on that program.[23] For a Type A program that is considered to be of low risk, then the auditor is not required to perform a compliance audit, although the Uniform Guidance allows the auditor to do so if he/she chooses to.[23] Although the risk assessment is performed by the auditor based on his/her judgment,[22] the Uniform Guidance does have two requirements for a program to be considered low risk.

In assessing the risk of Type B programs, auditors should use professional judgement and criteria established in the Uniform Guidance. According to 2 CFR 200.518, a minimum number of Type B programs must be identified as high risk, calculated as 25% of the number of low-risk Type A programs (rounded up). In assessing risk, auditors are encouraged to use an approach that allows different programs to be identified as high risk over time. The auditor is not expected to perform risk assessments on smaller Type B programs with expenditures that do not exceed 25% of the Type A threshold determined in step 1. Type B programs which have a low risk of not complying are not required to be audited.[18]

High-risk Type A and high-risk Type B programs are considered major programs and must be audited. The auditor then totals all of the federal award expenditures for the identified major programs and divides by the total federal award expenditures for the entity as a whole. For low-risk auditees, major program expenditures as a percentage of total award expenditures must be at least 20%. For high-risk auditees, the required coverage percentage is increased to 40%. If the identified major programs do not meet the required coverage percentage, then the auditor must select additional programs to audit until the required coverage percentage is met.[18]

The OMB Compliance Supplement is a large and extensive guide created by the OMB for Single Audits, and is considered the most important tool of both the auditor and the recipient when performing, or being subject to, a Single Audit.[5] It was created following amendments in 1996 to the Single Audit Act and serves to identify existing important compliance requirements that the Federal Government expects to be considered as part of a Single Audit. Without it, auditors would need to research thousands of laws and regulations for each single program of a recipient to determine which compliance requirements are important to the Federal Government. For Single Audits, the Supplement replaces any agency audit guides and other audit requirement documents for individual Federal programs.[5]

Compliance requirements are series of directives provided by Federal agencies that summarize hundreds of laws and regulations applicable to federal assistance and are important to the successful management of such assistance. The OMB created 14 basic and standard compliance requirements for which recipients must always comply with when receiving and using federal assistance, and provided detailed explanations, discussions, and guidance about them in the OMB Compliance Supplement.[25] These compliance requirements only serve as guidelines for compliance with the specific laws and regulations applicable to the assistance and their objectives are designed to be generic in nature, because of the amount of different federal programs provided by the government. For example, many federal programs have eligibility requirements for individuals or organizations to participate in such programs because they have been established by either laws, regulations, or contract provisions. However, while the criterion for determining eligibility varies from program to program, the objective of the Eligibility compliance requirement that "only eligible and qualified individuals or organizations participate" is consistent and universal across all federal assistance programs. This eligibility universal criterion is called the Eligibility compliance requirement.[26]

On March 19, 2020, the Office of Management and Budget issued a memo allowing certain extensions of deadlines because of the COVID-19 pandemic. For award recipients with fiscal year-ends through June 30, 2020, an agency is allowed to extend recipients' deadlines to complete and submit a Single Audit package by up to six months.[34][35] For award recipients with fiscal year-ends between July 1 and September 30, 2020, an agency is allowed to extend recipients' deadlines to complete and submit a Single Audit package by up to three months.[36][37]

The extension may be given automatically, but recipients should still retain documentation of how the pandemic reduced its operational capacity and how the award was affected.[34][35]

On June 18, 2020, the Office of Management and Budget issued a memo, stating that extensions are no longer allowed for organizations with 2020 year-ends because, "during the Coronavirus pandemic, many recipients learned the capabilities and are now getting the experience to perform the objectives of the Federal programs remotely with limited access to their physical office."[37]

• United States Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, as revised on June 26, 2007.
• United States Office of Management and Budget OMB Circular A-133: Compliance Supplement
• United States Office of Management and Budget; Office of Federal Financial Management, The Single Audit

• United States Office of Management and Budget Circular A-21, “Cost Principles for Educational Institutions”
• United States Office of Management and Budget Circular A-87, “Cost Principles for State, Local, and Indian Tribal Governments”
• United States Office of Management and Budget Circular A-110, “Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations”
• United States Office of Management and Budget Circular A-122, “Cost Principles for Non-Profit Organizations”
• United States Office of Management and Budget Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations”
• United States Office of Management and Budget Circular A-133 Compliance Supplement

• The Single Audit Resource Center;
• Federal Grants Management Handbook, Thompson Publishing Group
• Single Audit Information Service, Thompson Publishing Group
• Warren Ruppel (2003), Miller Not-For-Profit Organization Audits With Single Audits: 2003–2004, Aspen Law & Business, ISBN 0-7355-3741-0
• Rhett D. Harrell (May 4, 2006), Local Government and Single Audits 2006, CCH (Wolters Kluwer), ISBN 0-8080-9023-2
• The Single Audit Act: Audits of States, Local Governments and Non-Profit Organizations; AICPA Audit Committee Toolkit: Non-profit Organizations; American Institute of Certified Public Accountants (AICPA)