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Ready or not, here comes the new single audit

auditIt is hard to believe we are approaching the end of another year. With the commotion of holidays and end-of-year requirements, some – particularly smaller non-profits – may have forgotten about the latest update from the Office of Management and Budget (OMB), which has new requirements for those who receive federal awards.

Historically, the various OMB Circulars dictate compliance, administration and audit requirements to ensure that federal funds received have been properly managed and utilized. All circulars have now been streamlined into one “super circular” document, 2 CFR 200. The circulars for education, government, and non-profit organizations have been combined while hospitals were left out for the OMB to further analyze. The implementation is effective for all new federal awards and extended funding on current awards made after December 26, 2014. However, the single audit implications are not effective until an organization’s fiscal year begins after December 26, 2014.

In other words, December year end organizations will be subject to the new single audit for the 2015 audit. Organizations with any other fiscal year end will be subject to the single audit changes in their audit for the fiscal year ending 2016. Regardless of the fiscal year end, all organizations receiving federal awards must adhere to the changes included in 2 CFR 200 beginning December 27, 2014.

What does this new requirement mean?

There are a few major changes aside from terminology clarifications. Specifically, there are significant changes to the procurement and sub-recipient monitoring requirements. There are also significant changes to allocating indirect costs and the related indirect cost rates. Lastly, there are extended requirements on documentation around time and effort reporting and internal controls.

One of the most significant changes that needs to be considered related to the new single audit is the amount of federal expenditures that triggers an audit. The changes increase audit thresholds from $500,000 to $750,000. Also, almost all other thresholds have increased (low risk determination, reportable findings, major program determination) while the number of compliance requirements has decreased. Why is the OMB making these changes? It won’t require as many audits or produce as many reportable findings. In fact, these new requirements will reduce the various burdens of a single audit for roughly 5,000 organizations and hopefully lead to efficient risk-based audits.

Non-profits need to comply with the changes in 2 CFR 200 regardless of whether or not they are subject to a single audit. Not ready or have specific questions? Consult your federal awarding agency and/or accountant. More information on single audit and other 2 CFR 200 requirements can be found on the Federal Government’s site: http://1.usa.gov/1whfgZ4. Don’t forget: make time to enjoy this holiday season too!

Garner BoThe preceding is a guest post by Bo Garner, CPA, MBA, an Audit Supervisor at PBMares, LLP and a leader of the firm’s Not-for-Profit team. PBMares is a regional accounting and business consulting firm serving clients throughout the Mid-Atlantic. For more information, please contact the author at bgarner@pbmares.com or visit: www.pbmares.com.

Topics: Legal