5 Signs Your Small Business Books Are Not Audit-Ready
Most DMV small businesses do not discover problems in their books until it is too late. Here are the five most common bookkeeping mistakes that put businesses at risk of losing contracts, failing audits, and leaving money on the table
My post content
The Single Audit Threshold Just Changed: What DMV Nonprofits Need to Know in 2026
If your nonprofit receives federal funding, there is a significant compliance change you need to know about right now. The federal Single Audit threshold rose from $750,000 to $1 million for the first time since 1997. This change took effect for federal awards issued on or after October 1, 2024.
Here is what that means for your organization, and what you should be doing about it today.
What Is a Single Audit?
A Single Audit is a comprehensive financial and compliance review required for nonprofits, local governments, and other non-federal entities that spend federal grant funds above a certain threshold in a fiscal year. It goes far beyond a standard financial statement audit. Under the Uniform Guidance (2 CFR Part 200), a Single Audit assesses your financial statements, your internal controls, and whether your organization is spending federal dollars in accordance with each program's specific requirements. The results are submitted to the Federal Audit Clearinghouse and are publicly available.
Failing to comply or failing the audit can result in repayment demands, loss of future funding eligibility, and serious reputational damage.
What Changed in 2026
For 27 years, any organization spending $750,000 or more in federal awards in a fiscal year was required to undergo a Single Audit. That threshold was never adjusted for inflation, even as federal grant spending grew dramatically following programs like the American Rescue Plan.
Effective for federal awards issued on or after October 1, 2024, the new threshold is $1 million. This means organizations spending between $750,000 and $999,999 in federal funds may no longer be required to complete a Single Audit, potentially saving $15,000 to $35,000 in audit costs annually.
However, there is an important catch. Awards issued before October 1, 2024 remain subject to the old $750,000 threshold. If your organization has multi-year grants that began before that date, you may still be subject to Single Audit requirements even if your total spending falls below $1 million. This dual-compliance environment will persist through at least 2026 for many organizations.
What DMV Nonprofits Should Do Right Now
1. Review your federal award dates. The threshold that applies to your organization depends on when your awards were issued, not when you received or spent the funds. Pull your grant agreements and check the issue dates carefully.
2. Track federal expenditures by award. You need to know not just your total federal spending, but which specific awards the funds came from. Proper tracking in your accounting system is essential for determining audit requirements and for the audit itself if one is required.
3. Don't assume you're off the hook. Even if you fall below the Single Audit threshold, your state of Maryland, Virginia, or DC may have its own audit requirements for organizations receiving state or local government funding. Each jurisdiction has different rules and revenue thresholds.
4. Strengthen your internal controls now. Whether or not you face a Single Audit this year, federal auditors and program officers evaluate your internal control structure. Weak controls are the most common finding in Single Audits and the hardest to remediate quickly.
5. Get audit-ready accounting in place before you need it. The organizations that struggle with Single Audits are almost always the ones that try to reconstruct records under pressure. Audit-ready bookkeeping means properly coded expenditures, documented cost allocations, and reconciled grant balances maintained throughout the year, not assembled at audit time.
The Bottom Line
The threshold change is good news for smaller federally funded organizations in the DMV area. But it does not reduce the complexity of federal grant compliance. It only changes who is required to have an independent auditor verify that compliance. The underlying requirements of the Uniform Guidance, including allowable cost rules, procurement standards, and subrecipient monitoring, apply regardless of your audit status.
If you are unsure whether your organization is subject to a Single Audit this year, or if you want to strengthen your financial systems before your next audit cycle, K. Graham Accounting & Advisory can help. We specialize in audit-ready accounting and federal grant compliance for DMV nonprofits and federally funded organizations.
Book a free consultation to review your compliance position today.