A Single Audit is a legal requirement for many schools, and this year it may apply to schools that never worried about it in the past. It is helpful to understand what it is and when it is required.
In the past, (before 1986) the Federal government required all agencies giving out Federal funds to check to make sure that the receiver was handling the funds properly. This became very burdensome, since an organization receiving grants from multiple agencies would require each agency to do a separate financial audit. Therefore, the government changed the rules and required any organization to get a Single Audit, which then can be used by all government agencies. (Since these regulations were originally written in the Office of Budgetary Management’s Circular Issue A-133, this audit became known as the ‘A-133’).
A Single Audit is having a licensed public accountant look through your financials to check that the funds of your major programs were handled properly. The auditor is trained to follow the paper trail and documentation for financials. The regulations require that any program or entity that spends more than $750,000 of Federal funds in total from all agencies and programs, within one year, have an auditor review that they spent the money in compliance with the specific program that granted them the money. After the audit is done, the auditor files the audit with the Federal government. This report details things the organization was doing incorrectly (called ‘findings’) and often suggests how to correct them.
The audit looks at three key components: 1) Financial statements – checking that all the documentation, invoices, reports, etc. are in place and properly filled out; 2) Internal controls – that the organization has proper safeguards and systems in place to make sure that the money is handled properly; and 3) Compliance – the specific rules of the program that the funds are being given out for are being followed.
Anyone requiring a Single Audit must have it completed within nine months of the end of their fiscal year. If all the different Federal grants are from one group of programs, called a cluster, then the organization only needs an audit of those specific programs. For example, if a school only receives funds from the Lunch Program and the Breakfast Program, since those two programs are from one cluster, they only need an audit of the Breakfast and Lunch Programs. However, if the school also received a security grant, they now need an audit of the whole organization, since the Federal funds are from more than one cluster. The National School Lunch Program, the School Breakfast Program, the Afterschool Snack Program, and the Summer Feeding Program are all one cluster. However, CACFP, FFVP and other grants are from different clusters, and if an organization participates in any of those programs as well, they will need an organization-wide audit. Remember, only Federal funds count towards the $750,000, any State and municipal funds do not.