2026 Single Audit Threshold: The $1 Million Readiness Plan for Nonprofits

Nonprofit leaders receiving federal grants enter the 2026 audit cycle with a higher Single Audit threshold and tighter expectations for grant documentation. The change helps smaller organizations, but it does not make grant compliance a year-end exercise. Once federal award expenditures approach $1 million, finance needs audit-ready records before the auditor asks.

The planning issue is whether the organization expended enough federal awards during its fiscal year to trigger Subpart F of the Uniform Guidance, whether the Schedule of Expenditures of Federal Awards (SEFA) is complete, and whether controls over allowability, procurement, reporting, and subrecipient monitoring can survive testing.

What Changed Under Uniform Guidance

OMB's 2024 Uniform Guidance revisions raised the Single Audit threshold from the long-running $750,000 level to $1,000,000. The current text of 2 CFR §200.501 requires a Single Audit or program-specific audit when a non-Federal entity expends $1,000,000 or more during the entity's fiscal year in federal awards.

The rule is not limited to large national charities. It can apply to nonprofit organizations, institutions of higher education, local governments, Indian Tribes, and other non-Federal entities. It can also apply when federal money is received directly from a federal agency or indirectly through a state, county, university, fiscal sponsor, or other pass-through entity.

Program-specific audits remain possible in limited situations, generally when the entity expends federal awards under only one federal program and the program rules do not require a full financial statement audit. Evaluate that election with the auditor before year-end.

The $1 Million Test Is Based on Expenditures

The threshold is based on federal awards expended during the fiscal year, not simply grant revenue recognized under GAAP, cash received, or the size of the grant agreement. Under 2 CFR §200.502, the determination generally follows the activity related to the federal award, including expenditure transactions, disbursements to subrecipients, use of program income, certain loan activity, and non-cash assistance.

A nonprofit may receive a $1.4 million grant advance near year-end but expend only $620,000 before the fiscal year closes. Conversely, modest cash reimbursements can still cross the threshold if the organization disbursed federal pass-through funds to subrecipients or used federal property or commodities that must be valued.

Track federal award activity by Assistance Listing number, pass-through entity, grant year, and period of performance. Waiting until the audit starts to classify expenditures usually creates the most expensive version of the problem.

A Practical Threshold Example

Assume a June 30, 2026 year-end nonprofit has the following activity:

• $720,000 of allowable costs reimbursed under a federal health program.

• $180,000 of equipment purchased under a federal award during the period.

• $140,000 of federal pass-through funding from a county contract.

• $90,000 of private foundation grants restricted for the same program.

The organization may think it is "under $1 million" because no single award exceeds the threshold. That is the wrong test. The federal award expenditures total $1,040,000 before the private foundation dollars are considered. Unless a valid program-specific audit election applies, the nonprofit should plan for a Single Audit.

Now change one fact: the $180,000 equipment award was approved but not purchased until July 2026. If no other federal award activity fills the gap, June 30, 2026 federal expenditures may be $860,000. The difference is timing, documentation, and the definition of federal awards expended - not the headline grant size.

Build the SEFA Before Year-End

The SEFA is not a schedule the auditor should build from scratch. Under 2 CFR §200.508 and §200.510, the auditee is responsible for preparing financial statements and the schedule of expenditures of federal awards. The auditor tests it. Management owns it.

A usable SEFA process should include:

1. Award agreements and amendments tied to the general ledger.

2. Assistance Listing numbers, federal agencies, pass-through names, and pass-through identifying numbers.

3. Federal expenditures by program, award year, and fiscal period.

4. Amounts provided to subrecipients, separated from vendor payments.

5. Notes describing significant accounting policies used to prepare the SEFA.

6. Reconciliation from the SEFA to trial balance accounts, grant receivables, deferred revenue, and reimbursement requests.

For nonprofits near the threshold, draft the SEFA monthly or quarterly so leadership can budget for fees, authorize auditor selection, and prepare committee calendars.

Controls That Draw Auditor Attention

Single Audits do not only test year-end numbers. They test compliance requirements that may have a direct and material effect on major programs. The 2025 OMB Compliance Supplement is the auditor's road map.

The usual pressure points are:

• Allowability: Costs must be necessary, reasonable, allocable, supported, and permitted by the award and Uniform Guidance.

• Procurement: Vendor selection files should show competition, required contract clauses, conflict checks, and procurement method support.

• Period of performance: Costs charged outside the authorized period create questioned-cost exposure.

• Reporting: Financial and performance reports should tie to books, reimbursement requests, and grant files.

• Subrecipient monitoring: Pass-through nonprofits need risk assessments, subaward terms, monitoring evidence, and follow-up documentation.

• Cash management: Advances, reimbursements, and drawdowns should match actual cash needs and award rules.

The best control file is a grant operating file maintained as the program runs.

FAC Deadline and Board Calendar

For a Single Audit, 2 CFR §200.512 generally requires the audit, data collection form, and reporting package to be submitted within the earlier of 30 calendar days after the auditee receives the auditor's reports or nine months after the end of the audit period. The Federal Audit Clearinghouse (FAC) is the repository of record for Subpart F submissions.

For a June 30, 2026 year-end, the nine-month date is March 31, 2027. If the auditor releases reports on February 10, 2027, the 30-day rule can pull the practical deadline into March. For a December 31, 2026 year-end, the nine-month date is September 30, 2027.

A better calendar is backward-planned:

1. Pre-close grant review 60 to 90 days before year-end.

2. SEFA draft within 30 days after year-end.

3. Major grant file cleanup before fieldwork.

4. Audit committee review of findings and corrective action plan before FAC submission.

5. Board-level monitoring of recurring findings and management letter comments.

Common Mistakes

• Using cash received as the threshold test. The audit trigger is based on federal awards expended, not just deposits.

• Leaving pass-through awards unidentified. Federal funds routed through a state or county may still be federal awards for SEFA purposes.

• Combining subrecipients and vendors. The compliance responsibility, monitoring file, and SEFA disclosure can differ materially.

• Assuming the $1 million threshold eliminates all audits. State law, funder terms, debt covenants, and board policy may still require a financial statement audit.

• Building the SEFA after fieldwork starts. That usually causes delays, scope expansion, and preventable findings.

• Letting findings repeat. Recurring findings signal governance and control weakness, even when the questioned-cost amount is small.

Proof Notes

• OMB's final Uniform Guidance rule was published at 89 FR 30046 and lists an October 1, 2024 effective date. See the Federal Register final rule.

• Current 2 CFR §200.501 requires a Single Audit or program-specific audit when a non-Federal entity expends $1,000,000 or more in federal awards during the fiscal year and generally exempts entities below $1,000,000 from federal audit requirements for that year. See 2 CFR §200.501.

• 2 CFR §200.502 explains that federal awards expended are determined based on when activity related to the award occurs, including expenditure transactions, disbursements to subrecipients, non-cash assistance, program income, and certain loan activity. See 2 CFR §200.502.

• 2 CFR §200.508 and §200.510 place responsibility on the auditee to arrange the audit, prepare the financial statements and SEFA, follow up on findings, and provide records to the auditor. See 2 CFR §200.508 and 2 CFR §200.510.

• 2 CFR §200.512 requires FAC submission generally by the earlier of 30 calendar days after receiving the auditor's reports or nine months after the audit period ends, and identifies the FAC as the repository of record. See 2 CFR §200.512 and the Federal Audit Clearinghouse.

• OMB's current Compliance Supplement page lists the 2025 Compliance Supplement for 2 CFR Part 200 Appendix XI, including compliance requirement parts and agency program requirements. See OMB Compliance Supplement.

The Bottom Line

The $1 million threshold gives some nonprofits relief from automatic Single Audit exposure, but it also raises the cost of being unprepared when federal award expenditures cross the line. The organizations that handle this well know their award inventory, draft the SEFA before the audit starts, keep grant controls current, and put FAC timing on the board calendar early. For nonprofits near the threshold, the planning conversation should happen before year-end, not after the audit engagement letter arrives.