This article is a high-level introduction to the single audit. Many details are not explained here because of the complexity of the topic and the intentional brevity of the article.
Sixty-ﬁve of the 277 towns that certiﬁed to accept American Rescue Plan Act (ARPA) funds will receive total awards – local and county – in excess of $750,000. In other words, almost a quarter of Vermont’s cities, towns, and villages will each receive more than three quarters of a million dollars. That is a lot of money! This amount is meaningful to any municipality that has ever undergone a “single audit” because spending $750,000 in one year happens to be the threshold amount that triggers the need for the audit.
What exactly is a single audit? The federal Single Audit Act Amendments of 1996 laid out requirements for organizations and people that receive federal awards – like your municipality’s ARPA grant award. The law aims to streamline the audit process so that awardees only have to conduct a single, annual audit instead of multiple ones for individual federal programs. “Uniform Guidance” is a term that you might recognize from your ARPA Terms and Conditions and Treasury's Compliance and Reporting Guidance. Simply put, Uniform Guidance is the current rules and regulations that implement the Single Audit Act, and it’s similar to how the Interim Final Rule (May 17, 2021) implements ARPA. Thank goodness for that civics class in middle school to help us understand this stuff. Does anyone else with graying hair out there have Schoolhouse Rock “I’m Just a Bill” playing in their head?
When is a single audit required, and what does it involve? A non-federal entity – let’s use your municipality as the example – spending $750,000 or more of federal awards (director indirect and from all programs) in your ﬁscal year is what triggers the need for a single audit. That audit must be performed by a certiﬁed public accountant (CPA) professional auditing ﬁrm (and not your elected auditors). Covering your entire operations, the single audit will determine if you met the compliance requirements of your federal program award(s), ARPA, and any other federal awards you received in the ﬁscal year.
The auditor will:
- provide an opinion on whether financial statements are presented fairly,
- test internal control over compliance,
- opine on compliance with federal statutes, regulations, and the Terms and Conditions, and
- follow up on prior audit findings.
When your auditor has completed their work for your single audit, within the prescribed timeline for completion, you must email its contents – the “reporting package” – to the Federal Audit Clearinghouse within 30 days of receipt from the auditor or nine months after the end of the audit period, whichever is earlier. Then, you are done. Simple. (She said facetiously.)
Have your eyes glazed over yet? If so, fear not! This is why you hire a professional CPA to do this work and help guide you through it. If you are among the 65 in the three-quarter mil. club and are new to this game, you might be saying to yourself: should I be thinking about drafting a request for proposals (RFP) for audit services? – and, lucky for you, you don’t have to reinvent the wheel to do this. VLCT has a model RFP for you to use to help you get started. If you have already engaged a professional auditor, you might want to notify them that your municipality is the recipient of a federal award in excess of $750,000, so a single audit could be on your horizon, depending upon when you expend the funds. It might not impact your current ﬁscal year, but it could aﬀect the next one. Discuss what this means in reference to your current scope of services with your auditor and work on a potential amendment to your agreement with them. Determine what the pricing adjustment will be, should a single audit be needed, and then encumber some of your ARPA money to fund this expense – because this is an eligible use of the money.
You are at the start of what may be a ﬁve-year ARPA journey. Think of it as a marathon and not a sprint. Take stock. Get organized. Plan and prepare. Good, consistent record-keeping will be the thing that keeps you well paced and steady in the race and get you across the ﬁnish line on your feet and intact, maybe even as the winner. Put yourself in your auditor’s shoes. If you were coming to your town/city oﬃce, what kinds of records would you want to review: a disastrous mess of a mountain of paper and squirrely-named scans, or an easy-to-navigate digital ﬁle folder structure containing consistent project records of contracts, deliverables, and invoices? It is extra work, but it could be the diﬀerence between your municipality keeping its money and having to give it back to the federal government. That would be a tough one to explain to your tax payers!
Document, document, document. And then, document some more.
VLCT’s ARPA Assistance and Coordination Program was created to serve you, our members. Its purpose is to provide you with access to the most current information, resources, education, and technical support to help you successfully manage, track, and report your ARPA funding for the life of your award. We have a dedicated ARPA webpage (vlct.org/arpa), email address (firstname.lastname@example.org), and ARPA Director, Katie Buckley. Learn, communicate, and connect!