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The single audit is an audit performed on all aspects of an organization that receives more than $500,000 US Dollars (USD) of federal funds from the United States government in a single year. Such institutions eligible to be audited include states and cities, universities, and non-profit organizations. By conducting such an audit, the U.S. government can keep track of how its funds are being managed and make sure they're not being wasted or misused in any way. This audit came about when the U.S. Congress passed the Single Audit Act in 1984.
Each year, the United States federal government doles out millions of dollars' worth of assistance to state and local governments, public universities, and certain non-profit organizations. Keeping track of all of this money is a task whose scope grows every year as the amount of money being distributed increases. For this reason, the U.S. Congress stepped in with the Single Audit Act of 1984, which is an attempt to make sure that the receivers of the largest amounts of these funds were both financially responsible and compliant with the law.
Before the Single Audit Act, the process of auditing the receivers of federal assistance was far less streamlined. Depending on how many different federal agencies were involved in doling out the money, an organization might have been subject to multiple audits in a single year. This proved to be a waste of resources, both in terms of the government hiring multiple independent accountants to conduct the audits and in terms of the organizations having to prepare for them.
Under the Single Audit Act, the authority to oversee the yearly audit on those organizations receiving more than $500,000 USD in federal funds falls to the Office of Management and Budget, or OMB. The guidelines for the yearly audit are laid out in a document known as OMB Circular A-133, which is why the audit is also known as the OMB A-133 audit. This document lists what the entity receiving funds must do to comply.
In general, a single audit is composed of two components. First, there is the audit of financial reports provided by the organization in question. The second part is a thorough examination of how the organization manages the money it is given and whether it takes the proper steps to make sure that these funds are redistributed in accordance with federal laws. Any type of fraud or misappropriation of funds must be properly and promptly addressed by the organization in question to prevent further federal government involvement.
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