141. Audit Readiness
By the end you'll be able to
- Identify when a Single Audit is required under 2 CFR Part 200 Subpart F.
- Map the compliance requirements auditors test against your operations.
- Maintain a grant binder that consolidates evidence in audit-ready form.
- Respond constructively to audit findings to limit repeat exposure.
Audit readiness is the discipline of running your grant every day as though the auditor will arrive tomorrow, because eventually one will. Any non-federal entity that expends $750,000 or more in federal awards in a fiscal year must obtain a Single Audit under 2 CFR Part 200 Subpart F (formerly OMB Circular A-133). The Single Audit covers financial statements, internal controls over compliance, and compliance with the requirements applicable to each major program identified by risk-based selection.
In this lesson you will learn what auditors actually look for: allowability of costs, allocability across awards, period of performance compliance, procurement documentation, subrecipient monitoring evidence, cash management practices, equipment and real property tracking, matching and earmarking, eligibility determinations, reporting accuracy, and special tests defined in the OMB Compliance Supplement. You will also learn the record retention rule: three years from the date of the final FFR, longer if litigation or unresolved audit findings are pending.
By the end you should be building and maintaining a grant binder (digital or physical) that contains the NoA, modifications, approved budget, prior approval correspondence, procurement files, effort certifications, drawdown records, submitted reports, and program documentation. When the auditor arrives, you hand them the binder. Organizations that wait until audit notification to assemble records consistently generate findings that organizations with grant binders do not.
Common mistakes
These are the traps learners hit most often on this topic. Knowing them in advance is half the fix.
Assembling records only after audit notification.
Organizations that wait until the auditor calls inevitably generate findings that organizations with continuous binders do not, because reconstruction is harder than maintenance.
Treating findings as something to argue rather than something to fix.
A combative response to a finding extends the cycle and damages the relationship. A corrective action plan with specific remediation steps closes findings and protects future awards.
Practice problems
Try each on paper first. Click Show solution only after you've made a real attempt.
- Problem 1You learn that your organization will trigger a Single Audit this year for the first time. Draft an audit readiness plan.
Show solution
Confirm the $750,000 trigger by pulling year-to-date federal expenditures across all awards. Apply the risk-based major-program selection rules to identify which awards will receive substantive testing. For each major program, assemble a grant binder containing the NoA and modifications, approved budget, prior approval correspondence, procurement files with quotes and sole-source memos, effort certifications, drawdown records, submitted FFRs and PPRs, and program data. Engage a CPA firm experienced in Single Audits, schedule fieldwork at least 60 days before the nine-month post-fiscal-year deadline for FAC submission, and run an internal mock-audit checklist against the OMB Compliance Supplement.
Practice quiz
- Question 1At what level of federal expenditures in a fiscal year is a Single Audit required for a non-federal entity?
- Question 2How long must grant records generally be retained after the final FFR?
Lesson 141 recap
Audit readiness is a daily discipline anchored in the grant binder. The Single Audit under 2 CFR Part 200 Subpart F applies at $750,000 in annual federal expenditures and tests compliance with the OMB Compliance Supplement requirements.
Coming next: Lesson 142 — Grant Closeout
Next, we walk through the final stage of every award, closeout.
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