When an organization receives Federal funding, they could be subjected to a compliance audit, or Single Audit. If an organization spends $750,000 (or more) of the Federal funding received in one fiscal year, they are required to have a compliance audit to ensure that they are spending the money in compliance with Federal regulations and the terms of their grant agreement. The compliance audit is performed and reported on in conjunction with the financial statement audit, or as a single engagement, hence the name "Single Audit."

In addition to your regular responsibilities for your financial statement audit, you are also responsible for compliance with the requirements of each of the Federal award programs you operate. Furthermore, you are responsible for the design, implementation and maintenance of effective internal controls over compliance with the requirements of laws, statutes, regulations, rules and provisions of contracts or grant agreements applicable to your Federal programs.

As the auditor, our objective is to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to in the paragraph above occurred, whether due to fraud or error, and express an opinion on your compliance based on our audit. In order to express this opinion, we must obtain an understanding of your internal controls over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances.  Then we test and report on your internal controls in accordance with the Uniform Guidance, although not for the purpose of expressing an opinion on the effectiveness of your internal controls over compliance. 

As a result of our audit test work, we may report audit findings.  These may include: 

• Findings of noncompliance
• Findings of significant deficiencies or material weaknesses in internal controls over compliance 
• Findings of questioned costs, where we identify certain costs charged to a grant that may not have been appropriate

If we have identified any of the above-mentioned types of findings, the results will be documented on the Schedule of Findings and Questioned Costs in your audit report and they will be filed with the Federal Audit Clearinghouse. 

We will ask you to provide a Corrective Action Plan (CAP) for every noncompliance and internal control finding.  The CAP should be on your letterhead and must include a response to each finding that includes the following criteria in accordance with 2 CFR 200.511(c):

• The name(s) of the contact person(s) responsible for corrective action,
• The corrective action planned, and
• The anticipated completion date of the corrective action, or
• If the auditee does not agree with the audit findings or believes corrective action is not required, then the corrective action plan must include an explanation and specific reasons to explain why.

Both the finding and your CAP will be uploaded to the Federal Audit Clearinghouse. 

It is up to the Federal granting agency to review and follow up on the findings and questioned costs reported in your Single Audit.  They may choose to take no action, or they may contact you for a further review of the results of your audit.  It is important to note that just because we report a noncompliance or internal control finding, it does not necessarily mean the Federal agency will take any action.  Equally important to note, just because we report a questioned cost, it does not necessarily mean the Federal agency will disallow this cost or ask for reimbursement of that cost. 

The impact of the finding on the next audit will depend on the type of finding.

For an auditee to be considered a low-risk auditee (qualifying them for reduced audit coverage when we design our testing), their Type A programs (typically programs with expenditures greater than $750,000) must not have had any of the following in the preceding two audit periods, according to guidance at 2 CFR 200.520 (e):

• Internal control deficiencies that were identified as material weaknesses,
• A modified opinion on a major program (qualified, adverse, or disclaimer of opinion), or
• Known or likely questioned costs exceeding 5% of the total Federal awards expended during the audit period.

The overall risk factor applied to an auditee during our audit planning affects the number of overall grant programs we may be required to test.

The finding may also impact the decisions made when we perform the major program determination to select grant programs to test in the next year.  For a Type A program to be considered low-risk, it must not have had any of the following in the most recent audit period according to 2 CFR 200.518 (c):

• A modified  opinion (qualified, adverse, or disclaimer of opinion)
• A material weakness in internal controls over compliance
• Known or likely questioned costs exceeding 5% of total program expenditures

The risk level applied to Type A programs during our planning affects the number of overall grant programs we may be required to test.

If a noncompliance or control finding is reported for your current audit, you will need to provide your auditor with a Summary Schedule of Prior Audit Findings (Summary Schedule) at the same time you provide them with the Schedule of Expenditures of Federal Awards (SEFA) for your audit in the following year. 

The Summary Schedule must report the status of all audit findings included in the prior audit's schedule of findings and questioned costs, in accordance with 2 CFR 200.511.  The Summary Schedule must also include audit findings reported in the prior audit's Summary Schedule of Prior Audit Findings, unless audit findings were listed as corrected, are no longer valid, or do not warrant further action.

• When audit findings were fully corrected, the Summary Schedule need only list the audit findings and state that corrective action was taken. 
• When audit findings were not corrected or were only partially corrected, the Summary Schedule must describe the reasons for the finding's recurrence and the planned corrective action and any partial corrective action taken.

If you would like any further explanation regarding the information mentioned above, or if you have questions specific to your Single Audit, please reach out to Kimberly Wall, our Federal Compliance Team Manager, and she will gladly assist you.