If You Receive Federal Grants Then a Single Audit May Be Required

If you have any grants or cooperative agreements (i.e., federal awards under 2 CFR 200), you must annually determine whether you must obtain an audit, as required by 2 CFR Subpart F. These are referred to as “Single Audits.” And yes, even if you get audited by the Defense Contract Audit Agency (DCAA) or one of its hired Independent Public Accountants (IPAs) for your FAR-based contract or subcontracts, if you have a grant, you will need a second audit.

What is a Single Audit and When is it Required?

A single audit is a two-phase audit comprising a financial statement audit in accordance with Generally Accepted Government Auditing Standards (GAGAS) and a compliance audit of the internal controls associated with expenditures under Federal awards (grants and cooperative agreements), as addressed in 2 CFR 200 Subpart F - Audit Requirements. A Single audit is required when a non-federal entity (state and local governments, non-profit organizations, institutes of higher education, or for-profit companies) expends a certain level of federal funds during its fiscal year. While organizations that receive grants from one agency may request a program-specific audit, such audits must meet certain criteria. We generally see single audits performed.

For those organizations that have not experienced a single audit, it can be expensive, especially if you have not budgeted for it. Some organizations may have had the Defense Contract Audit Agency (DCAA) or an Independent Public Accounting (IPA) firm perform an incurred cost audit on their FAR-based contracts. The DCAA/IPA audit does not count as a financial statement audit required under 2 CFR 200 Subpart F.

If you have both FAR contacts and Federal awards (grants), you are going to need two audits. The single audit is on you to coordinate and pay for; do not wait for a government auditor like DCAA to show up.

Organizations are responsible for determining if a single audit is required and engaging an accounting firm to perform it. Unfortunately, there are two thresholds to deal with if you have grants issued before and after October 1, 2024.

1. Grants awarded prior to October 1, 2024, are subject to a $750,000 audit threshold.
2. Grants issued after October 1, 2024, are subject to a $1,000,000 audit threshold.

The overlapping audit threshold won’t affect those organizations that expend more than $1,000,000 in federal funds each year since the single audit is required. Getting your federal expenditures calculated correctly and determining the right threshold to apply can be complex – let us help you with this.

When is the Single Audit Due?

Single audits and program-specific audits must be submitted to the Federal agency and uploaded to the Federal Audit Clearinghouse (FAC) within 9 months of the completion of an organization’s fiscal year or 30 days after receiving the audit report, whichever is earlier. The requirement to upload to FAC was effective for audits after October 1, 2023. Recipients who cannot meet the required due dates should communicate with the Federal Agency and obtain written approval for an extension. Failure to submit an audit in a timely manner is a noncompliance with the terms and conditions of the award. It can result in the withholding of payments, disallowance of costs, suspension, or termination of the award, and even suspension or debarment, as discussed in 2 CFR 200.339 Remedies for noncompliance.

Takeaways

Organizations that have expended Federal funds should perform an analysis of expended funds based on the terms and conditions of the grant and the effective date. If you meet the threshold for a single audit, we recommend you engage with a third party to perform the audit. If you have Federal funds expended under grants with the two different thresholds and are unsure if an audit is required, please reach out to us. Don’t procrastinate, as there is a strict timeline to complete the audit and upload it into the FAC system.

Grant Compliance Support and Audit Readiness Services

For government contractors managing federal grants or cooperative agreements, understanding and meeting audit requirements under 2 CFR 200 can be complex. Redstone GCI provides practical support to help organizations prepare for Single Audit obligations and maintain ongoing compliance. Our team of experts assists with documenting the audit requirement, developing tailored policies and procedures, and providing accounting and procurement manual templates for both non-profit and for-profit entities. We support the establishment of compliant accounting systems, offer monthly accounting services, and perform cost or price analyses as needed. In addition, we assist with grant-specific post-award requirements, including preparing SF-425 reports, reviewing invoices, and evaluating internal controls. To help ensure continued compliance, we offer training on grant requirements, timekeeping, and related internal processes. We support government contractors in meeting federal expectations and avoiding delays or findings that may impact funding or future eligibility.