Does the Single Audit Threshold Apply to You?

A federal grant award letter can create a compliance obligation long before the funds are fully spent. For nonprofit leaders, finance teams, and governing boards, the single audit threshold is the key dividing line: once an organization expends $1 million or more in federal awards during its fiscal year, it is generally required to obtain a Single Audit under 2 CFR Part 200, Subpart F.

That number is straightforward. Applying it correctly is not. The calculation turns on federal awards expended, not cash received, budgeted grant amounts, or the size of any one program. It can include direct federal funding, pass-through funding from a state or local agency, and certain noncash assistance. A late-year grant drawdown, a new subaward, or the timing of program costs can change the result.

What Is the Current Single Audit Threshold?

For recipient fiscal years beginning on or after October 1, 2024, the Uniform Guidance single audit threshold is $1 million in federal awards expended. Organizations below that threshold are not automatically exempt from federal oversight. They must still maintain records, comply with grant terms, monitor subrecipients where applicable, and make those records available for review by federal agencies or pass-through entities.

For fiscal years that began before October 1, 2024, the prior $750,000 threshold may apply. This transition point matters. Finance leadership should not assume that a current-year threshold applies merely because the audit fieldwork occurs after the effective date. The relevant question is when the organization’s fiscal year began.

A Single Audit is not the same as a financial statement audit. A financial statement audit addresses whether the financial statements are fairly presented in accordance with the applicable reporting framework. A Single Audit includes that financial audit, when required, and adds testing of major federal programs for compliance with applicable requirements and internal control over compliance. It also results in a reporting package submitted through the federal audit clearinghouse.

The Single Audit Threshold Is Based on Expenditures

The most common error is treating grant revenue, cash receipts, or award amounts as the measure. The Uniform Guidance focuses on federal awards expended during the fiscal year. Depending on the program and accounting circumstances, expenditures may include allowable program costs, indirect costs, noncash assistance, loan balances, and other forms of federal financial assistance identified in the Compliance Supplement and award terms.

For an organization receiving direct federal grants, the analysis may begin with its general ledger and grant expenditure reports. For organizations funded primarily through state, county, city, school district, or other intermediary sources, the work is often more complicated. Pass-through awards can carry a federal Assistance Listing number, federal award identification number, and federal agency designation that must be tracked separately from the pass-through entity’s own program label.

A human-services provider, for example, may receive reimbursements from a state agency under several contracts. Some may be federally funded, some may have mixed funding, and some may be entirely state-funded. A housing organization may receive HUD assistance, project-based subsidies, or other program support that requires specialized consideration. The funding source shown in a bank deposit description rarely provides enough information to support a reliable Single Audit calculation.

The Schedule of Expenditures of Federal Awards, commonly called the SEFA, is central to this process. It is management’s schedule, not the auditor’s schedule. The auditor tests it, but management is responsible for identifying federal awards, determining expenditures, assigning Assistance Listing numbers, identifying pass-through entities, and presenting required notes and disclosures.

What Should Be Included in the Calculation?

There is no safe shortcut such as counting only grants labeled “federal” in the chart of accounts. A disciplined analysis should consider each funding stream and the terms attached to it. In practice, management should determine whether awards are received directly from a federal agency or through a pass-through entity; identify the federal program and Assistance Listing number; reconcile federal expenditures to the general ledger; and evaluate whether noncash awards, loan programs, or clusters require separate treatment.

Certain federal programs have specialized rules. Federal loan programs, for example, can be measured using outstanding loan balances in some circumstances rather than annual activity alone. Food commodities, donated property, insurance, and other noncash assistance may require separate valuation and presentation. Programs within a federal cluster may be treated together for major-program determination, even when individual awards appear modest on their own.

That is why the threshold analysis should begin before year-end. Waiting until the financial statements are being finalized may leave little time to correct coding, gather award documents, resolve discrepancies with a pass-through entity, or prepare the SEFA accurately.

Reaching the Threshold Does Not Mean Every Grant Is Tested

A Single Audit does not test every federal program with the same intensity. The auditor performs a risk-based major-program determination under Uniform Guidance requirements. Larger programs, programs with prior findings, programs that have not been recently audited, and programs with higher assessed risk may be selected for compliance testing.

For each major program, the audit team evaluates compliance requirements that are direct and material to that program. Depending on the program, this may involve allowable costs, eligibility, procurement, reporting, matching, subrecipient monitoring, period of performance, equipment management, or special tests and provisions. The engagement also evaluates internal control over compliance in the areas tested.

This distinction has a practical governance implication. An organization can be well below the expenditure threshold for one particular grant and still have that program selected as part of a cluster or a broader major-program analysis. Conversely, a grant with substantial administrative attention may not be selected in a given year. Management should build compliant processes across its federal portfolio, not only around the program it expects an auditor to test.

Prepare the SEFA and Internal Controls Before Fieldwork

Organizations that approach the $1 million threshold should establish an audit-readiness process well before the close of the fiscal year. The objective is not simply to produce an accurate schedule. It is to ensure that the organization can demonstrate how federal requirements are carried out in daily operations.

The clearest picture your board will ever get is often created before the auditor arrives. A well-maintained grant file should connect the award agreement to the budget, the general ledger, reimbursement requests, performance reports, procurement records, payroll support, and management review evidence. If compliance depends on a review or approval, the organization should be able to show who performed it, when it occurred, what was reviewed, and how exceptions were addressed.

Internal controls do not need to be elaborate to be effective. They do need to fit the organization’s size, staffing model, and risk profile. A smaller nonprofit may rely on compensating controls when full segregation of duties is impractical, such as documented executive review of disbursements and regular board oversight. A larger organization may use formal grant management workflows, system access controls, and periodic compliance dashboards. In either case, undocumented practice is difficult to test and difficult to defend.

Management should also assess its subrecipient relationships. If the organization passes federal funding to another entity to carry out part of a federal program, it may have subrecipient monitoring responsibilities. Calling an arrangement a “contract” does not settle the issue. The substance of the relationship, including who determines program eligibility and has responsibility for programmatic decision-making, matters.

What Boards and Audit Committees Should Ask

Board members do not need to calculate the SEFA themselves, but they should receive clear, timely information about federal funding exposure. A productive audit committee discussion asks whether management has identified all direct and pass-through federal awards, whether the organization is approaching the applicable threshold, and whether controls are designed around the requirements most likely to be tested.

The board should also understand the consequence of audit findings. A finding is not automatically evidence of misuse or fraud. It may concern a control deficiency, incomplete documentation, late reporting, procurement noncompliance, or an unsupported expenditure. Still, findings require a formal corrective action plan and can affect funder confidence, future monitoring, and management capacity. Strong governance focuses on the root cause and whether the corrective action is specific, owned, and verifiable.

For organizations near the threshold, an early consultation with an audit specialist can clarify the applicable fiscal-year rule, identify gaps in federal award tracking, and establish a realistic timeline for SEFA preparation and fieldwork. That preparation gives management time to strengthen the record before compliance questions become audit findings.