Annual Audits, Single Audits & Understanding Each

Audit season. Isn’t that everyone’s favorite time of year?

Whether your fiscal year ends June 30, September 30, December 31, or some other date, it’s the time of year when an organization’s accountants, budget officers, finance staff, leadership, and grant professionals get to find out how well they tracked funding and followed internal policies.

And listen, no matter how well I managed my agency’s grant portfolio, I was always nervous when the auditors paid my office a visit. Did it matter that the worst finding I ever had was no proof I checked the suspended and debarred list? (A situation I immediately rectified and never had an issue with again.) I still dreaded other people combing through my books – because I’m a type A personality and want everything to be just so. And no matter how well I did, auditors seem to feel like they weren’t doing their job if they don’t find some sort of issue.

Whether you love or loath the process, it is a process that is necessary for organizations of a certain size, especially those in receipt of federal funds. On the latest episode of the Fundraising HayDay Podcast, Kimberly and I breakdown the differences between Annual Audits and Single Audits. You can take a listen HERE.

Annual Audits are also known as Regular Independent Audits or Audited Financial Statements. Some funders, both public and private, require these as a condition of eligibility to apply for grant funding. It entails hiring an independent, third party, auditor (either an individual or a firm) to conduct a review of your organization’s financial records, accounts, transactions, internal controls, and processes when handling funding – from grants to donations to taxes and everything in between.

Annual Audits are not cheap – so not every organization conducts one. Smaller organizations may instead do a financial review or a financial compilation. You’re stilling hiring a third-party auditor to review your finances, but they are not going deep into things like internal controls, risk assessments, and the like. It’s important for your agency to understand whether or not an Annual Audit is required – whether because a funder says so as an eligibility requirement for a grant or a governing body mandates your agency conducts one. For instance, many state agencies require local governments to conduct audits, though there may be exceptions for cities or towns of a certain size.

Single Audits are required if your agency spends $1,000,000 or more in federal funds during your fiscal year. This includes federal grant funds, federal pass-through grants, and a whole host of other things, like federal low-interest loans, cooperative agreements, and receipt of federal property.

A Single Audit is part of an Annual Audit. You’ll use the same independent auditor to do the work – it will just cost more because they will be reviewing more aspects of grant-related expenditures.

If you want a deeper dive into Annual versus Single Audits, take a listen to the podcast episode. And trust me, the more you know, the less stressed you’ll be about your annual visit from the auditor. Even though it was never my favorite time of year, each year the process was a little bit better than the year before. I’ve been through my fair share of Annual and Single Audits and lived to tell the tale!