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Not-for-Profit Single Audit Requirements – Evaluation of Revenue Sources

By: Holly Fields, CPA, Senior Manager

Not-for-profit organizations (NFPs) that receive federal financial assistance over certain levels, either directly from a federal agency or indirectly through state or local agencies, may be required to have a single audit performed under Federal Uniform Guidance.

Single Audit Requirements

A single audit includes not only an audit of the NFPs financial statements but also an audit of the federal awards received. The single audit requirement is based on whether expenditures of these revenue sources exceed $750,000 in one fiscal period.

As new funding is received, management should evaluate whether the award is directly from a federal agency or indirectly through state or local agencies. If funding is received indirectly (through a pass-through entity), the NFP must work with the pass-through entity in evaluating whether it is considered a subrecipient or a contractor. Federal awards expended by NFPs that are determined to be recipients and subrecipients are subject to audit under the Uniform Guidance. However, payments received for goods or services by NFPs that are determined to be contractors are not considered to be federal awards and are not subject to audit under the Uniform Guidance.

Characteristics of Subrecipients and Contractors in a Single Audit

Subrecipient:

  • The NFP receiving the funds from the pass-through entity determines who is eligible to receive the federal assistance
  • The NFP receiving the funds from the pass-through entity has its performance measured in relation to whether the objectives of the federal program are met
  • The NFP receiving the funds from the pass-through entity has programmatic decision-making responsibility
  • The NFP receiving the funds from the pass-through entity is responsible for adhering to applicable federal program requirements specified in the federal award
  • The NFP receiving the funds from the pass-through entity uses the funds to carry out a program for a public purpose specified in authorizing statute(s), as opposed to providing goods and services for the benefit of the pass-through entity

Contractor:

  • The NFP is providing goods and services within its normal business operations
  • The NFP provides similar goods or services to many different purchasers/clients
  • The NFP normally operates in a competitive environment
  • The goods or services provided are ancillary to the operating of the federal program
  • There is no requirement in the agreement with the pass-through entity that the NFP receiving the funds is subject to the federal program’s compliance requirements

All the above characteristics may not be present. The substance of the relationship is more important than the form of the agreement in making the determination of whether the NFP is a subrecipient or contractor.

Reporting for a Single Audit

NFPs that are required to have a single audit performed must submit their reporting package to the Federal Audit Clearinghouse within 30 days after receipt of the auditor’s reports, or nine months after the end of the fiscal year, whichever comes first.

If you have any questions as you evaluate your funding and whether your organization is considered a subrecipient or contractor, please consult a Blue & Co. advisor.

 

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