Dec 14, 2016
Ann M. Cole CPA
Governmental or not-for-profit entities that expend $750,000 or more in federal awards are required to have a single audit. For single audits of years ended after December 31, 2015, Title 2 U.S. CFR Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (“Uniform Guidance” or “UG”) is in effect, and the auditor will be using the requirements within the UG to perform their audit.
The UG requires auditors to use a risk-based approach throughout the audit process and the UG is very specific as to how the risk assessment is to be applied. First, the auditor is going to assess the entity’s overall risk and determine if the entity is a low-risk auditee. If the entity is considered a low-risk auditee, the entity qualifies for reduced audit coverage. The auditor would only be required to audit 20 percent of the federal dollars that have been expended as reported on the entity’s schedule of expenditures of federal awards (SEFA). The auditor is required to consider the following items in making the low-risk determination. These requirements must be present in each of the preceding two audit periods for the entity to qualify as low-risk:
- Single audits were performed on an annual basis
- Single audit reporting packets and data collection forms were uploaded to the Federal Audit Clearinghouse by the required deadline
- Auditor’s in-relation-to opinion on the SEFA is unmodified
- No deficiencies in internal control were identified as material weakness under the requirements of Generally Accepted Government Auditing Standards (Yellow Book)
- The prior audit reports did not report a substantial doubt about the entity’s ability to continue as a going concern
- None of the federal programs had audit findings from any of the following in either of the two preceding audit periods in which they were classified as Type A programs:
- Internal control deficiencies that were identified as material weaknesses in the auditor’s report on major programs
- A modified opinion on a major program in the auditor’s report on major programs
- Known or likely questioned costs that exceeded five percent of total federal awards expended for a Type A program during the audit period
As always, the entity being audited should have an open dialog with their auditor to fully understand how these requirements may apply to their current year audit.