If your nonprofit receives federal funding and someone has mentioned the words “single audit” or “Single Audit,” you probably need clear nonprofit audit services guidance before your next board meeting. The distinction between a standard financial statement audit and an Single Audit is one of the most commonly misunderstood compliance questions in the nonprofit sector, and getting it wrong has real consequences. This post explains both audit types in plain language, walks through how to determine which one applies to your organisation, and tells you what to do if you are not sure.
What You’ll Learn
• The $1 million federal award expenditure threshold that determines whether your nonprofit needs an Single Audit rather than a standard financial statement audit
• What a standard audit covers and what it leaves out, and why some funders will accept one but federal agencies will not
• The specific outputs an Single Audit produces that a standard audit does not, including the Schedule of Expenditures of Federal Awards
• How to work out which audit applies to your organisation based on your funding sources and annual expenditure levels
• What happens if a nonprofit gets this wrong and what to do if you are not certain which requirement applies to you
Table of Contents
1. Why Nonprofit Audit Requirements Confuse Even Experienced Executive Directors
2. What Is a Standard Nonprofit Financial Statement Audit?
3. What Is an Single Audit, and When Does Federal Funding Trigger One?
4. How Do You Know Which Audit Your Nonprofit Needs?
5. What Happens If Your Nonprofit Gets This Wrong?
6. Questions Nonprofit Leaders Ask Before Choosing an Audit Type
7. Your Next Step If You Are Not Sure Which Audit Applies
Why Nonprofit Audit Requirements Confuse Even Experienced Executive Directors
The confusion is understandable. The word “audit” gets used loosely by grantors, board members, and funders in ways that do not always reflect the legal distinction between audit types. One funder might ask for “audited financials” and mean a standard financial statement audit. A federal agency might require a “single audit” and mean something significantly more involved. If no one has explained the difference, you can easily agree to one thing while your compliance obligations require another.
Most online resources on this topic are written for accountants, not executive directors. They assume familiarity with accounting standards, federal regulations, and audit terminology that most nonprofit leaders simply do not have. That is not a failing on your part. It is a gap in how this information is communicated.
Ready CPA’s audit and assurance services are built around exactly this kind of situation: a qualified executive director who needs a clear answer, not a technical briefing.
What Is a Standard Nonprofit Financial Statement Audit?
A standard financial statement audit is an independent examination of your nonprofit’s financial statements that results in an auditor’s opinion on whether those statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework, such as U.S. generally accepted accounting principles (GAAP).
A standard financial statement audit gives an opinion on whether your nonprofit’s financials are presented fairly; an Single Audit goes further and tests whether your organisation is complying with the specific requirements attached to each federal grant it received.
What a Standard Audit Covers
• Your balance sheet, income statement, statement of cash flows, and notes to the financial statements
• A review of your internal controls and accounting processes as they relate to financial reporting
• An opinion letter from the auditor stating whether the financials are materially accurate
Who Requires a Standard Audit
• Private foundations, before making a significant grant
• Lenders, as a condition of a loan
• Your board of directors, as part of good governance practice
• Some state and local government funders
What a Standard Audit Does Not Cover
A standard financial statement audit is not, by itself, the federal Single Audit required under 2 CFR Part 200, Subpart F. It does not provide the required compliance testing of major federal programs or the Single Audit reporting package. If your organisation is subject to the federal Single Audit requirement, a standard financial statement audit alone does not satisfy that requirement.
What Is a Single Audit, and When Does Federal Funding Trigger One?
The Single Audit, now formally governed by the Uniform Guidance (2 CFR Part 200) after the original OMB Circular Single Audit was superseded, is a combined financial and compliance audit required for organisations that spend above a specific threshold in federal awards. The name “single audit” reflects the original intent: rather than requiring a separate audit for each federal program, one audit covers all federal expenditures in a given year.
For fiscal years beginning on or after October 1, 2024, a non-Federal entity that expends $1 million or more in Federal awards during its fiscal year generally must have a Single Audit or a program-specific audit, as applicable, under 2 CFR 200.501. The threshold is based on Federal awards expended during the fiscal year, not the amount of a single grant.
What a Single Audit Covers Beyond the Standard Audit
| Element | Standard Audit | Single Audit |
|---|---|---|
| Financial statement opinion | Yes | Yes |
| Internal controls over financial reporting | Yes | Yes |
| Compliance with federal program requirements | No | Yes |
| Schedule of Expenditures of Federal Awards (SEFA) | No | Yes |
| Report on major program compliance | No | Yes |
| Findings reported to federal awarding agency | No | Yes |
The Schedule of Expenditures of Federal Awards (SEFA) is a required component of the Single Audit reporting process. It presents the Federal awards expended during the fiscal year, including information such as the Federal agency or pass-through entity, Assistance Listing number or other identifying information, and amounts expended, as required by the Uniform Guidance. The SEFA is based on expenditures, not simply on the amount of awards received.
What Counts as a Federal Award
This is where the threshold question gets more nuanced. Federal awards can include:
• Direct grants from federal agencies (such as the National Endowment for the Arts or HUD)
• Federal funds passed through a state or local government to your organisation
• Federal contracts and cooperative agreements
Private foundation grants, corporate sponsorships, and individual donations generally do not count as Federal awards merely because the private funder may have received Federal money from another source. Federal procurement contracts are also treated differently from Federal financial assistance and generally are not Federal awards for Single Audit purposes. The key question is the legal nature and source of the award, not simply whether government money is somewhere in the funding chain.
For nonprofit accounting services in the Gulf South, this distinction matters particularly for organisations receiving Community Development Block Grant funds, HUD grants, arts endowment awards, or funding passed through Louisiana or Mississippi state agencies from federal sources.
How Do You Know Which Audit Your Nonprofit Needs?
Start with the Federal awards your nonprofit expended during the fiscal year. The $1 million threshold is a key trigger, but it is not the only question: the type of Federal assistance, applicable statutory exceptions, and whether another audit requirement applies can also matter.
A Simple Decision Framework
Step 1: List every source of funding your organisation received.
Separate Federal awards, other government funding, foundation grants, earned revenue, and individual contributions. Keep Federal awards distinguishable from Federal procurement contracts and other non-Federal funding.
Step 2: Identify which funding sources are federal.
For any government grant, check whether the funding originates from a federal agency, even if it was paid to you by a state or city agency. Ask your program officer or check your grant agreement for a Assistance Listing number (formerly the Assistance Listing number). If a Assistance Listing number is present, the award is federal.
Step 3: Add up your total federal expenditure.
Calculate the amount of Federal awards expended during the fiscal year. Do not simply add the face value of awards received. The treatment of balances and particular types of Federal assistance can vary, so the Uniform Guidance and the award terms should be reviewed for unusual funding arrangements.
Step 4: Apply the threshold.
If the total is below $1 million, the federal Single Audit threshold in 2 CFR 200.501 is generally not met, although another Federal, state, local, grantor, or organizational requirement may still require an audit. If the total is $1 million or more, the entity generally must have a Single Audit or, when permitted, a program-specific audit.
Common Scenarios
Scenario 1: A New Orleans arts organisation receives a $300,000 NEA grant and a $250,000 pass-through grant from the Louisiana Division of the Arts using federal funds. Total Federal award expenditures are $550,000. That is below the $1 million threshold for fiscal years beginning on or after October 1, 2024, so the federal Single Audit threshold is not met, although a separate audit may still be required by a funder, state law, or another applicable requirement.
Scenario 2: The same organisation adds a $200,000 HUD community arts grant mid-year. Total federal expenditure is now $1 million. A Single Audit is required for that fiscal year.
Scenario 3: A nonprofit receives four separate federal grants of $200,000 each from different agencies. Total Federal award expenditures are $800,000. The amount is aggregated across applicable Federal awards, but it remains below the $1 million threshold for fiscal years beginning on or after October 1, 2024. A Single Audit would therefore not be triggered solely by this expenditure amount.
What Happens If Your Nonprofit Gets This Wrong?
Non-compliance with federal audit requirements is not a technicality. The consequences are concrete and can affect the organisation’s ability to receive future federal funding.
Potential Consequences
When Is a Single Audit Due?
A required Single Audit reporting package generally must be submitted to the Federal Audit Clearinghouse within the earlier of 30 calendar days after the auditor’s report(s) are received or nine months after the end of the audit period, subject to applicable exceptions or extensions. The current Federal Audit Clearinghouse is operated by the General Services Administration.
• Audit findings and corrective action: Single Audit findings are included in the reporting package and addressed through the applicable Federal follow-up and management-decision processes. Unresolved findings can require corrective action and continued follow-up.
• Clawback of grant funds: If an audit reveals that federal funds were not spent in compliance with program requirements, the awarding agency can require repayment.
• Remedies for noncompliance: Depending on the circumstances and applicable award terms and law, Federal agencies or pass-through entities may impose remedies for noncompliance, which can include withholding payments, disallowing costs, suspending or terminating awards, or taking other authorized action.
• Governance and reporting risk: Missing a required audit can create additional compliance, reporting, and governance issues and may require corrective action.
A Single Audit must be performed by an auditor that meets the applicable independence and professional requirements. The engagement is not a bookkeeping function, and the auditor must comply with the professional standards and Government Auditing Standards requirements that apply to the engagement.
That distinction matters because many small and mid-size nonprofits rely on bookkeepers for their day-to-day financial management. A skilled bookkeeper is a valuable team member, but they cannot sign an audit opinion. Only a licensed CPA with the appropriate independence and qualifications can do that, and only a CPA with Single Audit experience will understand what the Uniform Guidance requires across different program types.
It is also worth noting the nonprofit tax compliance red flags that often accompany unresolved audit questions. If your organisation has unreconciled federal expenditures, inaccurate grant reporting, or late filings, these are issues that surface during audit work and can compound an already difficult situation. A quick review of common nonprofit tax compliance red flags is a useful starting point if you are not sure where your organisation stands.
Questions Nonprofit Leaders Ask Before Choosing an Audit Type
What is the difference between an Single Audit and a standard nonprofit audit?
A standard financial statement audit provides an opinion on whether your nonprofit’s financials are presented fairly. An Single Audit goes beyond that to assess compliance with the specific requirements attached to each federal award your organisation received. Both are conducted by licensed CPAs, but they serve different purposes and produce different reports.
How do I know if my nonprofit needs an Single Audit single audit?
If your nonprofit expends $1 million or more in Federal awards during a fiscal year, it generally falls within the Single Audit requirement under 2 CFR 200.501, subject to applicable exceptions and the possibility of a program-specific audit where permitted. The $1 million threshold applies to aggregate Federal award expenditures, not one grant in isolation. The $1 million threshold applies to fiscal years beginning on or after October 1, 2024.
Can my bookkeeper handle our nonprofit’s audit?
A bookkeeper can support your accounting records, but cannot replace the independent auditor required for an audit engagement. A Single Audit must be performed in accordance with the applicable professional and Government Auditing Standards requirements, including independence requirements.
What happens if my nonprofit needed an Single Audit and didn’t get one?
Failure to complete a required Single Audit can result in noncompliance and follow-up actions under the Uniform Guidance and applicable award terms. Depending on the circumstances, remedies can include questioned or disallowed costs, withholding of payments, suspension or termination of an award, or other authorized actions.
Do foundation grants count toward the Single Audit threshold?
Generally, no. Private foundation grants and individual donations are not Federal awards simply because the private organization may have received Federal funding elsewhere. For pass-through funding, the award’s Federal source and legal structure matter. Federal procurement contracts are also treated differently from Federal financial assistance. Review the award agreement and applicable Assistance Listing information rather than relying only on the name of the funder.
What does an Single Audit single audit actually produce?
In addition to the standard audited financial statements, an Single Audit produces a Schedule of Expenditures of Federal Awards (SEFA), an auditor’s report on internal controls over financial reporting, and a report on compliance with requirements applicable to each major federal program. These reports are typically required by the federal awarding agency as a condition of the grant.
Your Next Step If You Are Not Sure Which Audit Applies
If you are still not certain which audit your organisation needs after working through this post, the most useful thing you can do is have a 20-minute conversation with a licensed CPA before your next board meeting or funder deadline. Not a bookkeeper, not a general accountant. A CPA with specific Single Audit experience.
Ready CPA has provided audit and assurance services to nonprofits across New Orleans and the Gulf South corridor for 18 years. Aaron Ready holds both CPA and CFE (Certified Fraud Examiner) credentials, which means he understands not just the financial statement side of an audit, but the internal controls and compliance dimensions that federal audits examine in detail. That combination matters for nonprofits navigating federal grant requirements, because the risks on both sides are real.
If you want a broader checklist of what your board and grantors typically expect on the compliance side, you can download the Nonprofit Finance Compliance Checklist as a companion resource. It covers audit timelines, funder reporting standards, and board reporting minimums in one place.
For executive directors across New Orleans, the Mississippi Gulf Coast, and the Alabama Coast, questions about nonprofit audit requirements do not have to stay unanswered. A review of your Federal awards, expenditure totals, and applicable award terms can clarify which requirements apply.
Book a free 20-minute call with Aaron. He can walk through your funding sources, Federal award expenditures, and audit questions with you so you can understand which requirements may apply. Schedule that conversation at readycpa.com/discovery-call/
Key Takeaways
• A standard financial statement audit gives an opinion on your financials; an Single Audit assesses compliance with the requirements of each federal award your organisation received
• The Single Audit threshold is $1 million in total federal expenditure in a fiscal year, across all federal sources, not per individual grant
• Foundation grants, corporate sponsorships, and individual donations do not count toward the federal award expenditure threshold
• Only a licensed, independent CPA can conduct either type of audit; a bookkeeper does not have the legal authority to issue an audit opinion
• Non-compliance with Single Audit requirements can result in audit findings, fund clawbacks, and restrictions on future federal eligibility
• If you are not certain which audit applies, the fastest path to clarity is a conversation with a CPA who has Single Audit experience
Ready to Get a Clear Answer?
If your nonprofit receives federal funding and you are not certain whether a Single Audit is required, do not wait until a grantor asks or a board member raises the issue. Book a free 20-minute consultation with Aaron Ready, CPA, CFE, at readycpa.com/discovery-call/. No obligation, no pressure. Just a straightforward answer to a question that deserves one.