The Single Audit: A Complete Guide to Uniform Guidance Compliance

The Single Audit represents one of the most complex and consequential compliance requirements facing state, local, and nonprofit organizations. Codified in Uniform Guidance (2 CFR 200), the Single Audit is a federal mandate: any organization expending $750,000 or more in federal awards during its fiscal year must obtain an independent audit that includes testing for compliance with federal requirements.

For organizational leadership, auditors, compliance officers, and finance managers, understanding the Single Audit framework—its thresholds, processes, findings classifications, and remediation pathways—is essential. Non-compliance can result in questioned costs, audit findings, loss of future federal funding, and heightened federal oversight.

This guide walks practitioners through the complete Single Audit landscape.

The $750,000 Threshold and Coverage

What Constitutes a Federal Award?

Federal awards include:

Direct federal grants and contracts
Pass-through funding from states (e.g., a state educational agency distributing U.S. Department of Education grants)
Federal loans and loan guarantees
Property transfers
Indirect costs reimbursements

What is excluded:

Federal procurement contracts with private sector entities (unless the entity is a nonprofit or governmental entity)
Certain federal pension contracts
Federal direct student loans (in some contexts)

The Threshold Calculation

The $750,000 threshold is applied to the organization's total federal expenditures in a single fiscal year, not to individual grants. An organization with five federal grants totaling $800,000 is subject to the Single Audit requirement, even if no individual grant exceeds $150,000.

De Minimis Exception

Organizations expending less than $750,000 in federal awards during the fiscal year are exempt from the Single Audit but must still comply with federal award requirements (they are subject to other audit or monitoring requirements, depending on the grantor agency).

Preparing the Schedule of Expenditures of Federal Awards (SEFA)

The SEFA is the foundation of every Single Audit. It lists all federal awards expended during the fiscal year, organized by grantor agency and, within each agency, by program.

SEFA Structure and Content

A typical SEFA includes:

Column	Content	Note
Grantor Agency	Federal agency name (e.g., U.S. Department of Transportation)	Required
Federal Program or Cluster	Catalog of Federal Domestic Assistance (CFDA) number and program name	Required; clusters combine related programs
Program Title	Program name	Required
Federal Expenditures	Total amount expended in the fiscal year	Required
Pass-through Entity	State agency name, if funds are pass-through	Conditional
Pass-through Program Number	State or grantee identifier	Conditional
Loan/Loan Guarantee Amount	If applicable, the principal amount of the loan	Conditional

SEFA Reconciliation to Financial Statements

The SEFA must reconcile to the audited financial statements. For example, if federal grant revenue totals $2.5 million in the audited statement of revenues and expenses, the SEFA must total $2.5 million. Common reconciling items include:

Timing differences (accrued revenue vs. expenditure realization)
Indirect cost allocation (if indirect costs are claimed and separately presented)
Non-federal matched funds (which appear in the financial statements but not the SEFA)

CFDA Numbers and Program Clusters

The Catalog of Federal Domestic Assistance (CFDA) is the federal government's central registry of domestic assistance programs. Each program has a unique CFDA number (e.g., 84.027 for the Federal Pell Grant Program).

Program Clusters aggregate related CFDA numbers for compliance and audit purposes. For example:

Education Cluster: All U.S. Department of Education grants (multiple CFDA numbers)
Research and Development (R&D) Cluster: All federal R&D grants across agencies
Child Nutrition Cluster: U.S. Department of Agriculture child nutrition programs

Clustering simplifies major program determination by treating related programs as a single unit.

Major Program Determination

The Single Audit requires testing of "major programs." A major program is one where the auditor performs compliance testing and evaluates internal control over compliance. Not all federal programs are major; auditors use a statistical methodology to identify the largest and most significant programs.

Major Program Calculation

The auditor applies a two-step test:

Step 1: Calculate the Threshold The threshold is the larger of:

25% of total federal expenditures, or
$300,000 (indexed annually for inflation; as of 2026, approximately $345,000)

For an organization with $2 million in total federal expenditures, the threshold is 25% of $2 million = $500,000.

Step 2: Identify Major Programs Programs with expenditures exceeding the threshold are automatically major. Additionally, the auditor must test:

At least 20% of the largest federal programs (by expenditure)
All federal programs with known or suspected audit findings from the prior year

Example: Organization expends $3 million in federal awards across 12 programs:

Program A: $800,000
Program B: $600,000
Program C: $400,000
Program D: $300,000
Programs E–L: $900,000 (combined)

Threshold = 25% × $3,000,000 = $750,000

Major programs (automatic): A and B (combined $1,400,000)

The auditor must also consider audit risk and judgment. Program C, while below the threshold, carries significant compliance risk; the auditor may designate it as major.

Compliance Requirements: The Fourteen Areas

Uniform Guidance requires testing in 14 areas of federal compliance, labeled A through N:

Area	Requirement	Example
A	Allowable Costs/Cost Principles	Is the salary charged to the grant consistent with the employee's actual time spent?
B	Cash Management	Are federal funds disbursed on a timely basis (not drawn early or held unnecessarily)?
C	Equipment and Real Property	Are purchased assets tagged, inventoried, and used for authorized purposes?
D	Eligibility	Do beneficiaries meet program eligibility criteria (income, age, status)?
E	Matching, Level of Effort, Earmarking	Are matching funds actually provided? Is the required level of effort maintained?
F	Period of Availability of Federal Funds	Are federal funds obligated and expended within the allowed period?
G	Procurement and Suspension/Debarment	Are competitive procurement procedures followed? Are contractors not suspended or debarred?
H	Program Income	Is program-generated revenue (grants, fees) recorded and used according to federal guidance?
I	Real Property Acquisition and Use	Are acquired properties used for authorized purposes and maintained appropriately?
J	Reporting	Are required federal reports (SF-425, program reports) accurate and timely?
K	Subrecipient Monitoring	Does the pass-through entity monitor subrecipients for compliance?
L	Loan Management	Are loan balances tracked, interest calculated correctly, and collections pursued?
M	Procurement (Simplified Acquisition Threshold)	Are procurements under the simplified acquisition threshold subject to competitive rules?
N	Suspension and Debarment	Are contractors, vendors, and service providers on the federal suspension/debarment list?

Testing Methodology

For each major program, the auditor:

Understands the federal requirement
Develops a testing plan to determine compliance
Selects a sample of transactions
Tests each transaction against the requirement
Documents compliance or non-compliance

For example, in Area D (Eligibility), the auditor might:

Obtain the program eligibility criteria
Select a random sample of 25 beneficiaries
Verify that each beneficiary's income documentation supports their eligibility classification
Document any instances where a beneficiary did not meet eligibility criteria

Classification of Audit Findings

Not all instances of non-compliance are equal. Uniform Guidance classifies findings by severity, determining whether they result in questioned costs, remediation requirements, and potential loss of future funding.

Material Weakness in Internal Control

A material weakness is a deficiency, or combination of deficiencies, in internal control over compliance such that there is a reasonable possibility that it will not prevent or detect and correct noncompliance with a federal compliance requirement on a timely basis.

Characteristics:

Affects multiple transactions or programs
Results in material misstated compliance
Indicates that management lacks control over the activity

Example: A school district's grants manager processes grant expenditure requests without documented approval from the grant director. Over the fiscal year, $50,000 of ineligible expenses were expended. The lack of an approval control is a material weakness.

Significant Deficiency in Internal Control

A significant deficiency is less severe than a material weakness but still represents a notable control gap.

Characteristics:

Affects single or few transactions
Results in non-material misstated compliance
Indicates a control is missing but would prevent non-compliance if operating

Example: A nonprofit's grants accountant forgot to obtain a paid invoice for a $2,000 expense charged to a federal grant. The expense was eligible, but the supporting documentation was delayed. This is a control gap (the organization should have a checklist to ensure invoices are collected before expense posting) but is not material.

Material Noncompliance

Material noncompliance is non-compliance with a federal compliance requirement that has a material effect on the program.

Characteristics:

Affects material transactions
Quantifiable impact
May require reimbursement to the federal government

Example: A workforce development program expended $75,000 on salaries for individuals who did not meet the program's income eligibility criteria. The $75,000 is questioned (potentially subject to recovery). Material noncompliance exists because the program served ineligible beneficiaries contrary to federal requirements.

Questioned Costs

Questioned costs are expenditures that may not comply with federal requirements and thus are subject to disallowance by the federal grantor. Questioned costs include:

Ineligible costs (e.g., a meal purchased with grant funds when meals are not an allowable cost)
Unsupported costs (e.g., a salary charge with insufficient time documentation)
Undocumented costs (e.g., supplies purchased but not receipted)
Unallowable costs (e.g., lobbying or entertainment)

Corrective Action Plans (CAPs)

When the auditor identifies a finding, the auditee (organization receiving the federal funding) must prepare a Corrective Action Plan. The CAP is the organization's response to the finding and outlines steps to prevent recurrence.

CAP Components

A complete CAP must address:

Description of the finding (restated in the auditee's words)
Root cause (why did the non-compliance occur?)
Specific remedial action (what will be done differently?)
Timeline for implementation (when will the action be completed?)
Responsible party (who will ensure implementation?)
Monitoring mechanism (how will the organization verify that the action was effective?)

CAP Example

Finding: Allowable Costs (Area A) — The auditor noted that $8,000 in employee salaries were charged to a federal grant without supporting time documentation. Federal regulations require that salaries be supported by semi-monthly time records.

Root Cause: The grants manager was new and did not understand the time documentation requirement. Training on federal compliance requirements was not provided during onboarding.

Remedial Action:

Implement a semi-monthly time reporting process requiring employees to document hours worked on each federal grant.
Require grants manager to complete federal compliance training (OMB 2 CFR 200 training).
Establish a monthly review process where the finance director reviews all salary allocations for completeness of supporting documentation before payment processing.

Timeline: New time reporting process by March 31, 2026; training completed by February 28, 2026; monthly review process implemented by February 15, 2026.

Responsible Party: Chief Financial Officer and Grants Manager.

Monitoring: The CFO will report quarterly to the audit committee on the status of CAP implementation, including sample testing of time records and sign-offs.

The Federal Audit Clearinghouse and Follow-Up

Audit Clearinghouse Submission

All Single Audits must be submitted to the Federal Audit Clearinghouse within 30 days of audit completion. The clearinghouse is the central repository for audit findings and serves as an early warning system for federal agencies.

Submitters must provide:

The auditor's report
Financial statements and SEFA
Schedule of findings and questioned costs
Corrective action plan

Cognizant and Oversight Agencies

For organizations with federal expenditures exceeding $25 million, a specific federal agency is designated as the "cognizant agency." The cognizant agency:

Receives a copy of the audit
Monitors CAP implementation
May conduct follow-up testing
Can impose sanctions for non-compliance

For smaller organizations, federal agencies may designate an "oversight agency" for specific programs.

Follow-Up Audits and Questioned Costs

If the auditor identifies questioned costs, the organization must:

Repay questioned costs to the federal government, or
Request that the cognizant agency resolve the questioned cost through negotiation

For example, if the auditor questions $15,000 in ineligible costs:

The organization may repay the $15,000 directly to the federal grantor, or
The CFO may submit documentation to the cognizant agency demonstrating that the costs were actually eligible (e.g., providing supporting invoices or correspondence with the federal agency clarifying that the item was allowable under federal guidance)

COVID-Era Complications: ARPA and CARES

The American Rescue Plan Act (ARPA) and Coronavirus Aid, Relief, and Economic Security (CARES) Act significantly expanded federal funding to states, localities, and nonprofits, introducing additional compliance requirements and audit complexity.

ARPA Compliance Requirements

ARPA funding carries audit requirements beyond the standard 14 areas:

Spending deadline (often December 31, 2024, with some extensions): Funds must be obligated by the deadline.
Permitted use restrictions: ARPA funds for public health, workforce, housing, and water infrastructure had specific permitted uses. Non-compliance resulted in questioned costs.
Prevailing wage requirements (for infrastructure projects): Labor must be paid prevailing wage rates, with weekly certifications required.
American Buy requirements (manufactured goods): Products must be manufactured in the U.S. (with limited exceptions).
Reporting frequency: Monthly or quarterly reporting of expenditures was required during the drawdown period.

Common ARPA Findings

Auditors identified widespread ARPA compliance issues:

Failure to obligate funds by deadline: Organizations that did not issue purchase orders or contracts by the deadline had unobligated balances subject to recovery.
Ineligible expenditures: Funds used for purposes outside permitted use (e.g., ARPA housing funds used for general operations).
Prevailing wage failures: Contractors paid below prevailing wage rates; time certifications missing.
Incomplete documentation: Expenditure reports submitted without supporting invoices or time records.

Common Single Audit Findings in Practice

Research on Single Audit findings across multiple organizations reveals recurring patterns:

Area A (Allowable Costs)

Missing or inadequate time documentation for salaried employees
Disallowed activities (e.g., lobbying, entertainment) charged to federal grants
Indirect cost pools not properly allocated across cost centers

Area D (Eligibility)

Beneficiaries not meeting income or other eligibility criteria
Insufficient documentation of eligibility determination (e.g., missing asset verifications)
Ineligible family members included in benefit calculations

Area K (Subrecipient Monitoring)

Failure to conduct required monitoring activities (site visits, desk reviews)
Inadequate follow-up on subrecipient audit findings
Insufficient documentation of the monitoring process

Area J (Reporting)

Timeliness: Federal reports (SF-425 Federal Financial Report) submitted after the deadline
Accuracy: Expenditures misstated in federal reports vs. actual accounting records
Completeness: Required supplemental data (performance metrics, demographics) not included

Area G (Procurement)

Procurement without competitive bidding when required by federal rules
Failure to verify that contractors are not suspended or debarred
Inadequate documentation of procurement justification

Preparing for a Single Audit: Best Practices

Maintain complete and timely SEFA: Reconcile the SEFA to the financial statements monthly, not during audit fieldwork.
Document all federal expenditures: Keep invoices, time records, eligibility determinations, and program documentation in order.
Implement preventive controls: Use checklists, approval workflows, and supervisory review to catch errors before the auditor does.
Track CAPs from prior audits: Implement CAPs from prior Single Audits fully and document results.
Assign a compliance officer: Designate someone responsible for federal compliance oversight and training.
Conduct internal testing: Before the audit, test a sample of transactions in the 14 areas to identify issues and correct them proactively.
Train staff: Ensure that personnel involved in federal programs understand applicable requirements.

Key Takeaways

The Single Audit is a comprehensive, rigorous compliance examination—not a routine audit.
Federal expenditures exceeding $750,000 trigger mandatory compliance testing.
The SEFA is foundational; if it is incorrect, the entire audit is compromised.
Major program determination is statistical but involves auditor judgment; organizations should understand which programs are likely to be tested.
Findings are classified by severity; material weaknesses and material noncompliance result in questioned costs and potential loss of funding.
Corrective action plans are not optional; timely, credible implementation is essential to maintaining federal funding.
The Federal Audit Clearinghouse is a public database; audit findings are visible to grantor agencies and oversight bodies.
COVID-era programs introduced additional compliance layers; organizations must remain vigilant on spending deadlines and permitted uses.

The Single Audit framework serves a critical purpose: it ensures that federal funds are spent in accordance with congressional intent and federal law. For organizations receiving federal funds, investing in compliance—through staff training, preventive controls, and regular monitoring—is far more cost-effective than remediation after findings occur.

This article was prepared with AI-assisted research by DWU Consulting. It is provided for informational purposes only and does not constitute legal, financial, or investment advice. All data should be independently verified before use in any official capacity.