Clarity Tax & CPAs is a PCAOB-registered, peer-reviewed firm that has performed audits and attestation engagements for nonprofits, government contractors, community associations, and privately held companies since 1976. This engagement is anonymized to protect client confidentiality. The figures and findings reflect a real outcome from our audit and assurance practice.
Client Snapshot
- Industry
- Nonprofit / social services
- Size
- Roughly $4.2M in annual federal expenditures; 18 FTE staff
- Location
- Midwest (anonymized)
- Engagement type
- OMB Uniform Guidance Single Audit (2 CFR Part 200)
The Challenge
The organization received federal funding through three separate awards: a HUD Community Development Block Grant, a SAMHSA substance abuse program grant, and a USDA nutrition assistance pass-through. It had never been subject to a Single Audit. A staff transition in the finance department left the organization without anyone who understood the Uniform Guidance threshold (federal expenditures of $1,000,000 or more), and the prior bookkeeper had consolidated all grant activity into a single revenue line rather than tracking expenditures by program.
When the organization crossed the $1,000,000 threshold mid-year, its program officer flagged the compliance gap. The organization came to Clarity with roughly four months of disorganized grant records, no Schedule of Expenditures of Federal Awards (SEFA) draft, and real concern about what a federal auditor might find.
What We Did
- Reconstructed the SEFA by tracing all federal cash receipts and expenditures to individual awards, working directly with the finance team to establish proper program mapping and resolve consolidation errors in the QuickBooks file.
- Identified the two major programs subject to compliance testing (HUD CDBG as a Type A program and SAMHSA as a high-risk Type B program) and designed audit procedures around the applicable compliance requirements: allowable costs, eligibility, reporting, and cash management.
- Performed the financial statement audit concurrently under GAAS and issued an unmodified opinion on the financial statements.
- Issued one finding, a material weakness in internal controls over federal program expenditure tracking, along with a management letter detailing corrective action steps. The finding was documented in the Schedule of Findings and Questioned Costs, with a corrective action plan co-developed with management.
- Filed the audit package with the Federal Audit Clearinghouse within the required submission window, avoiding a late submission penalty.
The Outcome
The organization came into Uniform Guidance compliance for the first time. No questioned costs were identified, so no federal funds were at risk of clawback. The corrective action plan was accepted by all three federal awarding agencies without additional review. In the following fiscal year, the material weakness was remediated and downgraded to a significant deficiency.
Learn more about our single audit services, or read our guide to single audit thresholds, requirements, and timelines.