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Receiving federal funding can expand a nonprofit’s reach, but it also brings additional accounting, compliance and audit responsibilities. One of the most important is knowing whether your organization has crossed the threshold for a Single Audit.
For fiscal years beginning on or after October 1, 2024, a nonprofit that expends $1 million or more in federal awards generally must undergo a Single Audit or, in limited circumstances, a program-specific audit. The threshold increased from $750,000, but the calculation is not always as simple as looking at how much grant money arrived in your bank account.
Understanding the rule early gives your organization time to strengthen its records, prepare its Schedule of Expenditures of Federal Awards and avoid a last-minute scramble after year-end.
Key Takeaways
- The current federal Single Audit threshold is $1 million in federal awards expended across all federal programs during the organization’s fiscal year, not $1 million per award or program.
- The test is based on expenditures, not the total amount awarded or the cash received during the year.
- Direct federal awards and awards received through a pass-through entity can both count toward the threshold.
- A Single Audit examines the financial statements and compliance for major federal programs; it is broader than a standard financial statement audit.
- Organizations should maintain the grant records and internal controls throughout the year instead of trying to reconstruct them during fieldwork.
What Is a Single Audit?
A Single Audit is a coordinated audit required under the federal Uniform Guidance. It combines an audit of the organization’s financial statements with additional work over federal awards, including compliance requirements and internal controls related to major federal programs.
The word “single” does not mean the auditor performs only one test or reviews every federal award in the same way. It means one audit process is designed to satisfy the federal requirements that might otherwise require separate audits of individual programs. The auditor uses a risk-based process to identify the federal programs that receive major-program testing.
The reporting package generally includes the organization’s financial statements, the Schedule of Expenditures of Federal Awards, the auditor’s reports, a summary of prior audit findings and a corrective action plan when findings are reported.
Who Must Have a Single Audit in 2026?
A nonprofit generally needs a Single Audit when it expends $1 million or more in federal awards during its fiscal year. The $1 million threshold applies to fiscal years beginning on or after October 1, 2024.
For example, the new threshold applies to a calendar-year nonprofit’s year ending December 31, 2025, because that fiscal year began after October 1, 2024. An organization evaluating an earlier fiscal year should confirm which threshold applies to that audit period.
The threshold can include federal funding received directly from a federal agency and federal funding received as a subrecipient through a state, local government, university or other pass-through entity. Payments received as a contractor for goods or services generally are treated differently and ordinarily do not count as federal awards expended.
The Difference Between Awards Received and Awards Expended
The Single Audit test is based on when activity related to the federal award occurs. That is why the award amount, cash received and federal expenditures may all be different numbers.
Suppose a nonprofit receives a $1.2 million federal grant but expends only $800,000 during its fiscal year. That award alone would not cause the organization to cross the $1 million threshold for that year. By contrast, a nonprofit that expends $700,000 from a direct federal award and $350,000 from a federal pass-through award would generally have $1.05 million of federal expenditures and may need a Single Audit.
Certain awards require more specialized calculations. Loans and loan guarantees, noncash assistance, property, program income and amounts passed to subrecipients can affect the total. Organizations with these arrangements should review the award terms and Uniform Guidance rules with an advisor rather than relying only on the general ledger’s grant-revenue total.
Could a Program-Specific Audit Apply Instead?
A program-specific audit may be available when an organization expends federal awards under only one federal program and that program does not require a financial statement audit. Research-and-development awards have a separate, more limited path: the awards must come only from the same federal agency, or the same federal agency and the same pass-through entity, and the federal agency or pass-through entity must approve the program-specific audit in advance.
This is a limited alternative, not an automatic choice. Your auditor should evaluate the award structure and program requirements before the organization assumes it qualifies.
How a Single Audit Differs From a Regular Financial Statement Audit
A financial statement audit focuses on whether the financial statements are presented fairly under the applicable accounting framework. A Single Audit includes that work, but it also evaluates compliance and internal controls for major federal programs.
That additional scope may include testing whether costs were allowable, whether reporting requirements were met, whether procurement rules were followed and whether the organization complied with other requirements that apply to the selected programs. The exact compliance areas depend on the awards involved.
The organization also must prepare a Schedule of Expenditures of Federal Awards, commonly called the SEFA. The SEFA identifies federal programs and expenditures for the fiscal year and becomes a central document in the audit and Federal Audit Clearinghouse submission.
How Nonprofits Can Prepare Before Year-End
The best preparation begins before the audit period closes. Consider the following steps:
- Track federal awards separately. Maintain the federal agency, pass-through entity, Assistance Listing Number, Federal Award Identification Number, award period and expenditures for each award.
- Maintain the SEFA throughout the year. Updating the schedule quarterly or monthly is usually easier than rebuilding it after year-end.
- Reconcile award records to the general ledger. Federal expenditures reported on the SEFA should be supportable and traceable to the accounting records.
- Document internal controls. Identify who approves costs, monitors compliance, prepares reports, reviews subrecipients and follows up on exceptions.
- Keep the complete award file. Preserve grant agreements, amendments, approved budgets, reimbursement requests, payroll and time support, procurement records, program reports and other documentation required by the award.
- Review prior findings. If a previous audit identified a finding, document the corrective action and confirm the issue has been addressed.
- Engage the auditor early. Single Audit experience matters, and waiting until year-end can make scheduling and preparation more difficult.
What Happens After the Audit?
The audit reporting package and data collection form generally must be submitted electronically to the Federal Audit Clearinghouse within 30 calendar days after the organization receives the auditor’s reports or nine months after the end of the audit period, whichever is earlier.
The submission includes certifications from the auditor and a senior representative of the organization. Because most reporting packages become publicly available, the organization and auditor also must ensure protected personally identifiable information is not included.
What If Your Nonprofit Is Below the Threshold?
Expending less than $1 million in federal awards generally exempts the organization from the federal Single Audit requirement for that year. It does not eliminate the responsibility to maintain records or comply with the award terms. Federal agencies, pass-through entities and the Government Accountability Office may still review the records.
A grant agreement, state law, lender, board policy or other stakeholder may also require a financial statement audit even when a Single Audit is not required. The threshold should therefore be one part of the organization’s broader audit and compliance review.
Plan Before the Threshold Becomes a Deadline
A nonprofit may cross the Single Audit threshold because of one large award, several smaller awards or funding passed through another entity. The earlier your finance team identifies that possibility, the more time it has to organize the SEFA, strengthen internal controls and address documentation gaps.
Landmark’s government and nonprofit advisors can help your organization evaluate whether the Single Audit requirement applies, prepare for the audit and understand the compliance and reporting responsibilities tied to federal funding.
