Inquiry: “What funds count for federal funds for a single audit?”

Posted by Jennifer A. Varley, CPA on Feb 18, 2019 1:52:48 PM

We recently had an inquiry regarding “What funds count for federal funds for single audit?” Unfortunately, the answer to this inquiry isn’t exactly straight forward. 

Organizations that expend $750,000 or more of federal funds annually are required to have a Single Audit. Recipients of federal funds are responsible for identifying their federal awards and determining if they are subject to Single Audit requirements. In trying to determine if you are required to have a Single Audit, the first step is to determine the source of grant funds.Single Audits/Federal Audits/OMB A-133 Audits |  Which is it? What is it? and Determining Who Needs One.

How to Identify Federal Funds

Federal funds are considered federal funds if they originate at the federal level. This means that regardless of whether the awards are paid directly or indirectly to a nonprofit, via a state or local government agency, or even another nonprofit (subrecipient), if they originated at the federal level they are federal funds. This can make things a bit tricky.

Find the CFDA number on the grant contract.

A good starting point it the grant agreement or contract. Federal funds are categorized according to the Federal agency that provides them, for instance the U.S. Department of Housing and Urban Development (HUD), and are listed by Catalog of Federal Domestic Assistance (CFDA) number. Many grant agreements refer to this CFDA number in the contract.

(visit Grants.gov for a list of grant making agencies)

Agreements with federal agencies normally indicate that the funding would be included in the calculation of the funds expended during the year.

However, many federal agencies distribute their funds to state and local governments, who then make grants to organizations. That is when the trail becomes a little fuzzy and it is not quite as easy to determine the original source of the funding.

Some state and local governments will provide a CFDA number in the grant contract. This is the simplest way to determine the funds originated with the federal government. Unfortunately there are many contracts where the CFDA number is not included.

No CFDA number? Try the program name.

If the CFDA number is not provided in the contract, the program name can be used to determine if it is potentially a federally funded program. For example, many states (Pennsylvania included) administer funds for the Weatherization Assistance for Low-Income Persons Program. If the program name is defined in the contract it may be possible to determine that the program is federally funded by searching for the name in the Assistance Listings (Formerly the CFDA)on beta.SAM.gov.

Finally, if there is no CFDA number or the program name does not match one included in the Assistance Listings, then the recipient should contact the funder (i.e. state or local government) and inquire if they are aware of the source of funds. Hopefully, an answer can be obtained this way.

Add up all the federal funds no matter their source.

Once the source of all funds has been determined, the recipient must calculate the amount of these funds that were expended during the fiscal year. If that amount is $750,000 or more, the recipient is required to have a Single Audit performed.

The best case situation will occur if the CFDA number is included in the grant contract. After that, the recipient will have to do some leg work to determine the original source of funds. It is important to note that the lack of the information in the contract does not release the recipient of the responsibility to determine the source of the funds. It often takes some digging and investigation to get the correct information if it is not initially provided. It would be wise to document the CFDA number or whether the awards are federal when they are granted to help you keep track of which are or aren’t of federal origin.



Topics: Single Audit, Audit & Assurance, Federal Funds

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