Single Audit Threshold: The $750,000 Rule Explained

The $750,000 threshold for single audits is one of the most practically significant numbers in nonprofit compliance. Cross it, and you are subject to a rigorous federal compliance audit that examines not just your financial statements but your adherence to the requirements of every major federal program you administered. Understanding how the threshold works prevents surprises and enables planning.

How the $750,000 Threshold Operates

The threshold is based on federal expenditures — money spent on allowable costs under federal awards during the fiscal year. Three important nuances:

It aggregates across all federal programs. If you received $300,000 from a USDA food program, $250,000 from a HUD housing grant, and $300,000 in federal formula education funds passed through your state, your total federal expenditures are $850,000. Even though no single award exceeds $750,000, you have crossed the threshold.

It counts expenditures, not receipts. Money received but not yet spent does not count toward the threshold. If you received a $1 million federal grant in December but only spent $200,000 before your fiscal year ended, your federal expenditures are $200,000 for that year. The remaining $800,000 will count in the year it is spent.

It includes pass-through federal funds. Many nonprofits receive federal funds through state agencies or other intermediaries without realizing the funds are federal in origin. A community development grant from a state housing agency funded by federal CDBG dollars counts toward your total. Ask your program officers whether the funds you receive have a federal source — they are required to tell you.

Building the SEFA

The Schedule of Expenditures of Federal Awards is a required schedule in audited financial statements for organizations subject to the single audit requirement. Even organizations that are close to the threshold but below it are well-served by maintaining a SEFA-ready tracking system — because discovering mid-year that you have crossed the threshold with no documentation in place creates significant audit preparation burden.

For each federal program from which funds were expended during the fiscal year, the SEFA must show:

• The name of the federal agency
• The Assistance Listing (formerly CFDA) number
• The grant or contract number (award identification number)
• Whether the funds came directly from the federal agency or through a pass-through entity (and if so, the pass-through entity’s name and identifying number)
• Total federal expenditures for the fiscal year
• Whether any federally-purchased equipment is included in the expenditure total

Group programs by federal agency. The SEFA is typically the last schedule in the audited financial statements, after the primary financial statements and footnotes.

What Happens When You Cross the Threshold

Single audit requirement: Your organization must engage an independent auditor to perform the single audit within the required timeframe. The single audit must be completed and submitted to the Federal Audit Clearinghouse (FAC) at audit.census.gov within nine months of your fiscal year-end (or six months if your federal awarding agency requires it).

Major program determination: Not every program on your SEFA receives the same level of audit attention. Auditors use a risk-based approach under 2 CFR 200.518 to determine which programs are “major programs” requiring compliance testing. The basic rule: the auditor must test enough programs to cover at least 40% of total federal expenditures (or 20% for lower-risk auditees). The larger and riskier programs get selected first.

Compliance testing: For each major program, auditors test compliance with the specific requirements that apply to that program — the requirements listed in the OMB Compliance Supplement (things like allowable costs, eligibility, reporting, cash management, procurement). This goes beyond financial statement testing; it is a review of whether you actually followed the rules.

Audit findings and the FAC: Audit findings are reported in two formats: findings related to financial statements (material weaknesses and significant deficiencies in internal controls) and findings related to federal award compliance (noncompliance with program requirements). Both are reported in writing and submitted to the Federal Audit Clearinghouse, where they become publicly accessible records.

Crossing the Threshold Mid-Year

Some organizations approach the $750,000 threshold during the year as new grants come in. When you project that you will cross it before year-end, the appropriate response is not to slow expenditures — it is to prepare.

If you will be subject to a single audit:

1. Notify your external auditor as early as possible. Single audits are more complex than routine nonprofit audits and require additional audit procedures. Auditors need lead time to prepare.

2. Confirm your SEFA tracking is current. Every federal expenditure should be categorized by program with the Assistance Listing number recorded.

3. Review your compliance documentation. Single auditors will request documentation for specific compliance requirements. If you have gaps in procurement documentation, time and effort records, or subrecipient monitoring records, address them before audit fieldwork begins.

4. Identify your likely major programs. Using the auditor’s expected 40% coverage standard, estimate which of your federal programs are large enough to be selected for major program testing. Focus pre-audit documentation review on those programs.

Program-Specific Audits

A program-specific audit is available as an alternative when:

• The organization expends federal awards under only one federal program
• The program’s authorizing statute or program terms permit the program-specific audit alternative
• The organization does not submit financial statements that include federal programs

In practice, most nonprofits that have reached the $750,000 threshold receive funds from multiple federal programs and cannot use this alternative. The program-specific audit is most commonly used by organizations receiving funds from a single categorical formula grant.

If eligible, a program-specific audit uses the compliance guide for the specific federal program rather than the OMB Compliance Supplement and typically involves less comprehensive testing than a full single audit.