News & Insights

The increase in federal funding allocated to governmental entities has delivered much-needed financial support over the last year. While these funds were essential in assisting local governments in responding to pandemic needs, fill revenue gaps, and support communities hardest hit by the pandemic, they were accompanied by critical, often misinterpreted compliance requirements. For governmental entities that have not received significant federal aid in the past, this could come as a surprise. If your government received more than $750K of total federal funding, you may be required to have a single audit. What is a single audit? A single audit is when an entity expends more than $750,000 in federal funds during a fiscal year. Those expenditures are subject to what is referred to as Uniform Guidance (single audit). Government entities who have received and expended federal grants subject to a single audit have specific compliance requirements set forth for conducting testing. The guidance, released by the Office of Management and Budget, has 12 separate compliance areas that could relate to required procedures for specific federal funding. Uniform Guidance, or 2 CFR 200, comes with its own requirements. One of those requirements is specific to policies and procedures. It is recommended that procedures be written for all 12 compliance areas, however, the following areas have been noted as being the minimum required to have in place regarding federal grants:

• Cash Management (200.305) – procedures in line with 200.305 federal payment.
• Allowability of Costs (200.302) – determine the allowability of costs in accordance with subpart E of this part and the terms and conditions of the federal award.
• Procurement and Conflict of Interest (200.318) – procedures of conduct covering conflicts of interest and governing actions of its employees engaged in the selection, award, and administration of contracts.
• Compensation (200.430 & 431) – written procedures on how salaries and related expenses will be accounted for and charged to federal grants.
• Travel Reimbursement (200.474) – requires the written procedures regarding travel and lodging costs incurred by employees and officers.

There are multiple policy and procedure template examples that can be used and tailored to your specific internal controls and would provide adequate documentation of these requirements. Another single audit requirement is what is referred to as a SEFA, or a Schedule of Expenditures of Federal Awards. This additional schedule can be included within the audited financial statements or as a separate report that includes information regarding the different federal grants expended and what grants were tested under Uniform Guidance. Each award included within the SEFA must include the following items:

• Name of federal grant or cluster
• Federal Assistance Listing Number
• Pass-through grantor and number
• Total amount of federal expenditures during the fiscal year for each grant award
• Total amount of federal funds provided to sub-recipients from each program

In addition to the SEFA are requirements to include notes to the SEFA, Schedule of Findings and Questioned Costs, Corrective Action Plan, and Summary Schedule of Prior Audit Findings. Does your government entity need a single audit? We can help! Single audits can be stressful, especially for governments that haven’t experienced one in the past. Maner Costerisan is a proven partner for more than 300+ government entities across Michigan. With over a decade of on-time audit completions, our experts can simplify the process and ensure your government receives a quality audit.