COVID-19 Changes the Landscape for Single-audit Compliance

COVID-19 and its economic impact have left the nonprofit niche financially vulnerable, with corporate and individual donations dropping precipitously for many organizations. Relief funding under the CARES Act has helped some nonprofits remain reasonably stable. But funding also will likely impose new single-audit requirements on recipients already struggling to keep their heads above water.

The requirements can seem daunting under normal circumstances. In the midst of a pandemic, they might seem overwhelming. But compliance is critical — here’s what you need to know to get started.

What’s the general guidance?

The Single Audit Act of 1984 requires nonprofits with federal expenditures greater than $750,000 in a fiscal year to undergo an audit by an independent auditor. The mandate is intended to ensure that federal funds are properly spent. These specific requirements are found in Title 2 of the Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, more commonly known as the Uniform Guidance. In addition, the Office of Management and Budget (OMB) annually publishes the Compliance Supplement, which gives auditors detailed guidance on how to audit specific grants.

The OMB issued the most recent supplement in August 2020, for fiscal years starting after June 30, 2019. At that time, the agency indicated it would release an addendum in the fall of 2020 to address new programs created by the CARES Act, as well as existing programs affected by COVID-19. As of this writing, the addendum hasn’t been published. Single audits for fiscal years ending June 30 are due March 31, 2021, but the delay in availability of guidance that reflects COVID-19 considerations has led to a push from nonprofits and auditors for an extension.

What’s the role of CARES Act funding?

The CARES Act delivered billions of dollars in funding through a variety of programs. For example:

  • The Provider Relief Fund for health care providers distributed $175 billion,
  • The Coronavirus Relief Fund disbursed $150 billion, and
  • The Education Stabilization Fund sent out $30 billion.

The good news is that the Small Business Administration’s (SBA) popular Paycheck Protection Program (PPP) isn’t subject to the Uniform Guidance. Most other CARES Act programs are, though. Loans (but not emergency advances) received through the SBA’s Economic Injury Disaster Loan program, for instance, must be included on the Schedule of Expenditures of Federal Awards (SEFA). This is the form you must prepare under the Uniform Guidance that determines whether you meet the threshold that triggers the single-audit requirement.

Your SEFA also must include monies under the Coronavirus Relief Fund, the Provider Relief Fund, the Education Stabilization Fund, the COVID-19 Telehealth Program and others. Note that the August 2020 Compliance Supplement states that organizations should separately identify COVID-19 expenditures on the SEFA and that auditors should clearly identify audit findings that apply to COVID-19 new or existing programs.

What are the single-audit requirements?

Your auditor will review both the accuracy of your financial statements and your compliance with requirements of your federal award(s). You should determine the applicable requirements by reviewing your grant agreement or award letter and the Compliance Supplement. These documents may detail reporting deadlines, allowable expenses, matching contributions and similar requirements the auditor will evaluate.

Your auditor also will scrutinize and test your internal controls for compliance with federal awards. The Uniform Guidance recommends that controls reflect the Internal Control — Integrated Framework developed by the Committee of Sponsoring Organizations of the Treadway Commission or the Comptroller General’s Standards for Internal Control in the Federal Government (the “Green Book”).

Nonprofits should consider how the introduction of new pandemic-related funding programs, combined with the widespread shift to work-from-home, may have affected their control environment. Where necessary, make the appropriate adjustments immediately rather than waiting for auditors to flag gaps.

Proceed with caution

Even if this isn’t your organization’s first time undergoing a single audit, COVID-19 and the slow drip of guidance from the OMB likely complicates matters. Your CPA can help ensure you don’t fall short on compliance.



Although Paycheck Protection Program (PPP) loans aren’t subject to the Uniform Guidance single-audit requirement (see main article), recipients must exercise caution when applying the funds. One mistake to avoid is so-called “double-dipping.” Failure to avoid this practice could jeopardize your ability to qualify for 100% PPP loan forgiveness.

The Office of Management and Budget has made clear that organizations mustn’t charge payroll costs paid with PPP funds to other federal awards, as it would result in the government paying the same expenditure twice. To preempt such double-dipping, evaluate your awards for reimbursable expenses that overlap with PPP payroll costs. Then carefully track those costs and document the funds from which they are paid and charged. If they’re paid from awards, they can’t be forgiven.