The American Rescue Plan Act (ARPA) was signed in March 2021, establishing the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). Approximately $350 billion was allocated to support state, local, territorial, and Tribal governments in response to the COVID-19 pandemic.  Now more than ever, local governments who have never been subject to a federal single audit are reaching or exceeding the threshold of $750,000.

In this article we outline what a single audit entails, including a possible alternative you may be eligible for.

What Is a Single Audit?

A nonfederal entity with federal expenditures in excess of $750,000 is required by law to have a single audit completed. If you are used to having a financial statement audit, a single audit can be much more comprehensive. It requires an in-depth look at compliance and internal controls over major programs, and the results of this audit (including your financial statement audit) can be publicly accessed through the Federal Audit Clearinghouse website.

Single Audit Alternative

In April 2022, The Office of Management and Budget (OMB) issued a technical update that allows for an alternative to the single audit requirement for recipients of CSLFRF award. This alternative is a compliance examination engagement focusing on two compliance requirements: Activities Allowed and Unallowed and Allowable Cost/Cost Principles. This option is less involved than a Single Audit, as it does not require testing internal control over compliance – it focuses only on the two compliance requirements and eliminates the normal risk assessment process that could subject other programs to the Single Audit. Additionally, the alternative does not require a financial statement audit or a formal schedule of expenditures of federal awards, which would be required under a Single Audit. However, an entity could be required by state legislature or other sources to have a financial statement audit completed.

Who is Eligible for the Alternative?

A recipient that expends more than $750,000 in federal awards during a fiscal year is subject to the alternative if both the following criteria are met:

  • The recipient’s total CSLFRF award, received directly from the Treasury or as a non-entitlement unit of local government, is at or below $10,000,000, and;
  • Federal award expenditures during the fiscal year, excluding the CSLFRF expenditures, are less than $750,000.

We Can Help

Regardless of whether you are familiar with the issuance and compliance associated with federal awards, understanding the various requirements can be complex.