Amanda Martino, Senior Accountant, Audit & Accounting
“Single audits aren’t so bad” is a phrase we rarely hear. But why do single audits have such a stigma and how can we work together to change that?
This type of engagement tends to have a laundry list of procedures, requests, and requirements associated with it. Below are four areas of focus as well as tips and tricks to help you prepare for your single audit ahead of time. This will streamline the process and make it more enjoyable (yes, I said more enjoyable) for both you and your team!
- Starting the Process. Whether your organization is new to needing a single audit, or it’s part of your annual reporting process, single audits are triggered when your organization receives and expends federal assistance in excess of $750,000. To ensure that those federally funded awards are administered in accordance with key administrative and cost requirements, the U.S. Office of Management and Budget (OMB) published Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Uniform Guidance is the single source of guidance for the administrative management, financial management, and audit of federal awards. Stemming from the requirements of Uniform Guidance, single audits involve testing both internal controls over compliance and compliance with applicable compliance requirements outlined in the OMB Compliance Supplement. If you’re new to a single audit, reach out to your audit firm early on to discuss the audit process and to understand what will be expected of you and your team. You can also review the sections of the OMB Compliance Supplement that pertain to your organization’s federal awards to understand the key compliance requirements that may be tested and to identify the types of supporting documentation and reports that may be requested.
- Record Maintenance. Keep a separate folder on your computer that holds any documentation that may be necessary for your single audit. Most delays come from trying to accumulate the supporting documentation from various files and/or individuals. If you know that it relates to your federal awards/single audit, make a copy and throw it in that folder so that you are prepared. It takes an extra second in your day-to-day business, but it’ll save you time come audit season. Along with this, keep your Schedule of Expenditures of Federal Awards (SEFA) up-to-date. The SEFA is a supplemental schedule to your financial statements that details each federal award and, you guessed it, its respective expenditures.
- Selection Process. If you know your organization needs a single audit, ask your audit firm if it’s possible to carve out time prior to planning and fieldwork to make testing selections. This allows you time to pull support before you need to switch gears into the financial statement audit, and your engagement team will be able to hit the ground running with testing to keep things moving smoothly. This will help reduce delays on both sides—you’ll be able to dedicate time to each specific area and the team will lessen the chance of bottlenecks.
- Internal Control Reporting. One of the most time-consuming areas for both parties during a single audit is documenting an understanding of internal controls over compliance and then walking through those key controls. Whether this is your first experience or you’re a veteran, internal control narratives can be a bear. It can be extremely helpful to ask your auditors for a matrix of “what can go wrong” in designing and implementing internal controls. These matrices make it much easier to put your department in the scenario and to determine if the minimum controls within the process exist. It may also help you determine where more controls may be needed. A well-designed and implemented internal control system may help mitigate the risk of control deficiencies and potential fraud.
As I mentioned, joy isn’t typically associated with needing a single audit. However, if you implement the suggestions above into your audit process, it should feel a little less daunting.
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