By Melisa Galasso, Accounting and Auditing Learning Partner, South Carolina Association of CPAs
In response to the effect of the global pandemic on the U.S. economy, Congress passed several laws, such as the Coronavirus Aid, Relief, and Economic Security Act, Consolidated
Appropriations Act and American Rescue Plan Act that contained trillions of dollars to stimulate the economy. These funds came in the form of various grants, loans and other financial assistance, received by many state and local governments and nonprofit entities. Many of these entities have not previously received this level of funding. Federal guidance requires that any nonfederal entity that receives more than $750,000 in a fiscal year must have a Single Audit.
A Single Audit includes both a financial statement audit and a compliance audit. In compliance audits, auditors must obtain sufficient evidence that the funds were used in compliance with all
laws, regulations, terms and conditions of the award. Testing would include reviewing compliance requirements like eligibility, allowable costs and reporting. Single Audits also require auditors to test the operating effectiveness of internal compliance controls.
In a financial statement audit, an auditor is only required to evaluate whether the internal controls over financial reporting are designed and implemented, but testing the operating effectiveness is at the discretion of the auditor. Many of the tests and internal control work will be new to these organizations who may not have the documentation needed to obtain an unmodified opinion in the audit.
Not all audit firms perform Single Audits. Jurisdictions that have received enough funding to require a Single Audit may have to find a new auditor or determine if their current auditors will be willing to learn the intricacies of these audits. Entities receiving funds should make sure they
understand the terms and conditions of the awards and should contact their certified public accountant if they are unsure of the impact on their organization.
With over 15 years of experience in the accounting profession, Melisa Galasso with Galasso Learning Solutions designs and facilitates courses in advanced technical accounting and auditing topics,
including not-for-profit and governmental accounting.