Today we do a Deep Dive into the Four Most Common Single Audit Findings

“The Fantastic Four” was a comic book collection that debuted in 1961. However, those who may not even know what a comic book is were able to witness the amazing superpowers of Mr. Fantastic, the Invisible Woman, the Human Torch, and the monstrous Thing in the released movie in 2005 (followed by unsuccessful sequels).

Unlike the movie title, single audits are not fantastic. Instead, we are lending the title to a collection of common audit findings during a single audit. In fact, those that must endure single audits wish that they could use the superpowers of the Invisible Woman and make them disappear.

Single audits are the federal government’s first line of defense against fraud, waste, abuse, and mismanagement. As an organization, the last thing you want is to be non-compliant. So, the one question all organizations should ask is, “what are my vulnerabilities?”

We have compiled a “fantastic four” list of the most common single audit findings based on extensive research. The four most common findings are subrecipient monitoring, time and effort reporting, procurement, and cost allowability. We will briefly identify each of them and suggest strategies to prevent findings from occurring. The findings are not ranked in any particular order.

1. Subrecipient Monitoring:

   Grantees are required to ensure subrecipients use federal funds for authorized purposes, comply with Federal Statutes, regulations, and the terms and conditions of awards, and achieve performance goals.

   Common Red Flags:

   Lack of existing, written policies and documentation standards; subaward agreement missing key terms; lack of documented subrecipient risk assessment; and annual review of subrecipient single audits not performed or documented.

   Resolution:

   Perform risk assessment (highlight risk indicators as high, medium, or low risk) and if risks are identified, create a subrecipient monitoring plan. Next, ensure subrecipient required information aligns with the Uniform Guidance and agreement terms and conditions meet all requirements of the original federal award.

2. Time and Effort Reporting:

   This is the mandated method of certifying to the federal agency that the effort charged or cost-shared to each award has been completed.

   Common Red Flags:

   Budget estimates not being correctly certified at the end of a period; time and effort certifications not including all employee activity; budget estimates used when not appropriate, and period of performance not being considered.

   Resolution:

   Charges should accurately reflect the work performed; have a system of internal controls which shows charges are accurate, allowable, and allocable; should comply with established accounting policies and practices; support the distribution of the employee’s salary or wage and should be incorporated into the official records.

3. Procurement:

   This is obtaining goods and services for your organization.

   Common Red Flags:

   Lack of written procurement procedures; policies do not include procurement methods including noncompetitive procurements; small and minority businesses, and women’s business enterprises steps not taken; and cost and price analysis not performed and documented when necessary.

   Resolution:

   Organizations follow the allowable procurement methods (micro-purchase, small purchase) identified in 2 CFR 200.317-326; take affirmative steps to ensure that minority businesses, women’s business enterprises, and labor surplus area firms are used; and perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold, including contract modifications.

4. Cost Allowability:

   The Uniform Guidance is clear regarding allowable costs as they should be necessary, reasonable, and allocable to the federal award. In addition, allowable costs should be accorded consistent treatment as either direct or indirect costs.

   Common Red Flags:

   This one is simple. If the costs cannot meet the criteria of reasonableness, allowability, allocability, and consistency, it is unallowable. Please check with your awarding agency for a list of unallowable costs and see 2 CFR 200.410.

   Resolution:

   Implement an adequate and comprehensive compliant accounting system that can track allowable and unallowable costs as they are entered into the system; develop formal written policies and procedures (review, test and revise as necessary) that describe and differentiate allowable and unallowable costs; and train key personnel on these policies and procedures.

The single audit experience for your organization can be fantastic if you take the necessary steps and precautions to ensure that your organization is compliant. Remember, the goal of a single audit is to provide the U.S. Government and taxpayers assurance that tax dollars have been expended as intended and to help reduce the risk of fraud, waste, abuse, and mismanagement. If you are doing your part, the single audit process should be a smooth one and you will never have to worry about battling any one of the Fantastic Four