INSIGHT

Single audit requirements for nonprofits 

Shannon Winter • August 7, 2025

Industries: Nonprofit

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Navigating federal funding is more complex than ever for nonprofits, with new regulations, shifting priorities, and evolving compliance demands. Today, more than 100,000 nonprofits rely on federal government grants, collectively receiving over $300 billion each year—funds that are essential for delivering critical services and sustaining operations.  

This reliance on federal awards means nonprofits must meet single audit requirements if they exceed specific federal expenditure thresholds. The applicable threshold depends on when individual grant agreements and contracts were executed, which means organizations may operate under different thresholds simultaneously. Meeting these requirements is not just about checking a box; it’s a vital step in protecting your mission, ensuring transparency, and maintaining eligibility for future federal support. 

What is a single audit? 

A single audit is an audit that includes both the nonprofit organization financial statement audit as well as additional compliance requirements related to those that spend federal funds over $1million during a fiscal year. 

Unlike a standard financial statement audit, which focuses on the financial information being free of material misstatements and to provide reasonable assurance on the financial statements a single audit requires more. A single audit reviews the funding and programs for organizations that receive federal funding to ensure they are being spent and tracked in accordance with program requirements. 

This process requires auditors to test internal controls, review compliance with federal laws, and confirm that your organization is following all applicable federal regulations. The single audit is more detailed and rigorous than a typical nonprofit audit, covering both your financial statements and all federal programs, and must be submitted to the Federal Audit Clearinghouse for federal oversight. 

In short, the single audit provides the federal government and agencies with reasonable confidence that your nonprofit is a responsible steward of federal dollars, maintaining transparency and accountability at every step. 

When would a nonprofit undergo a single audit? 

Nonprofit organizations must undergo a single audit if they expend federal awards above specific thresholds during their fiscal year.  

• For fiscal years beginning before October 1, 2024, the single audit threshold is $750,000 in federal award expenditures.  
• For fiscal years beginning on or after October 1, 2024, this threshold increases to $1,000,000.  

What counts as a federal award? 

Federal awards expended include not only direct federal grants, but also funds from: 

• Cooperative agreements 
• Cost reimbursement contracts 
• Loan and loan guarantees 
• Surplus property 
• Donated property 
• Program income 

As well as other forms of federal financial assistance.  

The key factor is when the funds are expended, not just received. For example, loan proceeds are counted when used, and donated property is counted when received. There are some exceptions based on the type of federal funding and specific program requirements, so it’s essential to review the terms of each federal award and stay updated on federal regulations and Uniform Guidance.  

Not all contracts with the federal government qualify; the Uniform Guidance distinguishes between contracts and grants/cooperative agreements for audit purposes. Reviewing each federal program’s requirements and individual grant or award agreements helps to ensure compliance, as these may include different thresholds and requirements. 

When do you have to complete a single audit? 

Filings are due to the Federal Audit Clearinghouse within 30 days after receiving the auditor’s report, or nine months after the end of the audit period—whichever comes first.  

The single audit must also be provided to any relevant pass-through entities such as: 

• State governments 
• Local governments (such as counties or cities) 
• Public universities or colleges 
• Other nonprofit organizations acting as intermediaries 

For instance, if your nonprofit receives federal funds from your state’s department of health, that state agency is acting as a pass-through entity.  

Similarly, if a local government or a larger nonprofit receives a federal grant and then awards a portion to your organization, they are considered a pass-through entity. The single audit must be provided to any such pass-through entity in addition to the Federal Audit Clearinghouse. 

This ensures both the original federal agency and the intermediary (pass-through) organization can track federal award expenditures and confirm compliance with federal regulations and award agreements.  

Key components of a single audit 

A single audit is a multi-part process. Here’s a breakdown of the key components: 

Financial statement audit 

This part of the single audit examines your organization’s financial statements to ensure they are accurate, complete, and prepared in accordance with generally accepted accounting principles (GAAP) and government auditing standards (often referred to as the Yellow Book or GAGAS).  

The auditor reviews your financial records, internal controls, and financial reporting practices to confirm your financial position and results of operations. 

Compliance audit 

The compliance audit focuses on whether your nonprofit has followed the Uniform Guidance, federal regulations, and the specific requirements of each federal award or program.   

Auditors test your organization’s adherence to: 

• Activities allowed or unallowed 
• Allowable costs/cost principles 
• Cash management 
• Eligibility 
• Equipment and real property management 
• Matching, level of effort, earmarking 
• Period of performance 
• Procurement and suspension and debarment 
• Program income 
• Reporting 
• Subrecipient monitoring
• Special tests and provisions 

As well as other compliance areas. This step is crucial for demonstrating that federal funds are used as intended and in line with award agreements. 

Schedule of Expenditures of Federal Awards (SEFA) 

Your organization must prepare a SEFA for the same period as your audited financial statements. The SEFA lists each federal program, the amount of federal awards expended, the source agency, pass-through entities, and other required details.  

This schedule is essential for both the financial statement and compliance audits, as it provides a comprehensive view of all federal financial assistance received and used during the fiscal year. 

Internal control evaluation 

A single audit requires a thorough assessment and documentation of your internal control systems over federal programs. 

Auditors evaluate whether your controls are effective in preventing errors, fraud, and noncompliance. This includes reviewing segregation of duties, checks and balances, safeguarding of records, and the overall control environment. 

While auditors do not provide an opinion on the effectiveness of internal controls, the audit report will include any instances of non-compliance or internal control deficiencies identified during the audit process. 

Strong internal controls not only reduce risk but can also streamline the audit process. 

Reporting package 

The culmination of the single audit is the reporting package, which must be submitted electronically to the Federal Audit Clearinghouse.  

This package includes: 

• Audited financial statements 
• SEFA 
• Auditor’s reports on the financial statements and on compliance for each major federal program 
• Report on internal control over financial reporting and compliance 
• Report on major program compliance 
• Schedule of findings and questioned costs 
• Summary schedule of prior audit findings (if applicable) 
• Corrective action plan (if there were findings)
• Management letter (if issued) 

Each of these components plays a critical role in meeting single audit requirements, ensuring transparency, and maintaining your organization’s eligibility for future federal awards. 

The single audit process: Step-by-step 

The single audit process for nonprofits is a structured, multi-step journey that ensures your organization is accountable for every federal dollar it spends.  

Here’s how the process unfolds, from preparation to follow-up: 

1. Prepare 

Start by identifying all sources of federal financial assistance, including grants, cooperative agreements, cost reimbursement contracts, and any funds passed through other entities.  

Confirm your organization’s compliance responsibility for each federal award. It’s essential to maintain thorough supporting documentation, written procedures, and effective internal controls that align with Uniform Guidance and federal regulations.  

Prepare your financial statements and the Schedule of Expenditures of Federal Awards (SEFA), making sure every federal program and dollar expended is accurately documented. 

2. Select an auditor 

You must engage an independent, qualified auditor or CPA to conduct your single audit. The selection process should follow Uniform Guidance procurement standards, often involving a formal request for proposal (RFP).  

Evaluate candidates based on their experience with federal awards, technical qualifications, peer review results, and cost. Keep in mind that the auditor cannot be the same individual who prepares your organization’s indirect cost proposal or cost allocation plan. 

3. Audit fieldwork 

During this phase, the auditor tests your internal controls over federal programs, reviews compliance with the compliance supplement, and verifies that all expenditures are allowable and properly documented.  

They will also review program income, indirect cost rates, and modified total direct costs to ensure compliance with cost principles. Expect the auditor to request supporting documentation and explanations for how federal funds were used throughout the audit period. 

4. Reporting and submission 

Once the audit is complete, your organization must submit the reporting package—including the audited financial statements, SEFA, auditor’s reports, and any findings—to the Federal Audit Clearinghouse (FAC). This must happen within 30 days of receiving the auditor’s report or nine months after the end of the audit period, whichever comes first.  

The reporting package is filed electronically and becomes publicly available. You must also provide the single audit report to any relevant pass-through entities, such as state or local governments or other nonprofits that provided federal funds to your organization. 

5. Follow-up 

After submission, address any audit findings by implementing corrective actions and documenting your response. Prepare a summary schedule of prior audit findings to show how previous issues have been resolved. This step is crucial for demonstrating your commitment to compliance and for maintaining eligibility for future federal awards. 

By following these steps and maintaining strong financial management practices, your nonprofit can navigate the single audit process with confidence and transparency—ensuring continued access to vital federal funding. 

Get your nonprofit single-audit ready with BPM 

Understanding and meeting single audit requirements is essential for protecting your nonprofit’s mission and sustaining access to federal funding. Now is the time to evaluate your financial management practices and compliance readiness, ensuring your organization is prepared for the complexities of federal awards.  

If you’re ready to strengthen your compliance or have questions about your audit process, connect with BPM’s nonprofit outsourced accounting team.