Single Audit Readiness for FQHCs: Where Health Centers Continue to Get Tripped Up

For Federally Qualified Health Centers (FQHCs), single audit readiness—more precisely, readiness for an audit under Uniform Guidance—is no longer limited to the finance department. It is an organization-wide discipline that requires alignment across grants management, reimbursement, accounting, compliance, operations, and governance.

Under Uniform Guidance, a non-Federal entity that expends $1,000,000 or more in Federal awards during its fiscal year ($750,000 for fiscal year ends beginning before October 1, 2024) is subject to an Audit Under Uniform Guidance (i.e., single audit). A single audit includes an audit of the entity’s financial statements and a compliance audit of major Federal programs, together with required reporting on internal control over financial reporting and internal control over compliance. Even organizations below that threshold remain responsible for maintaining records that can support review by Federal agencies, pass-through entities, and the Government Accountability Office. In that environment, readiness is not simply about preparing for fieldwork, it is about whether the organization’s grants, reimbursement activity, and financial reporting are connected through clear, documented, and consistently applied controls.

Many of the findings that continue to surface are not driven by unusual technical issues and a lack of understanding. More often than not, they tend to be the result of routine process failures that are often visible months before year-end.

Beyond Finance

Single audit readiness is often treated as a finance exercise until the audit begins. In practice, that approach is usually too narrow. Federal grants may originate with program or executive leadership, reimbursement activity may sit with revenue cycle or billing teams, and compliance responsibilities may be dispersed across finance, grants administration, operations, and clinical leadership. The single audit, however, evaluates whether those functions are working together in a way that produces complete, accurate, and supportable compliance and reporting.

That is why repeat findings often reflect coordination failures rather than knowledge gaps. If key information about awards, expenditures, reporting obligations, or compliance requirements is not shared across functions throughout the year, the organization is forced into catch-up mode during audit season.

SEFA Challenges

The Schedule of Expenditures of Federal Awards (SEFA) remains one of the most common trouble spots. The SEFA must cover the same period as the financial statements and include all Federal awards expended, the applicable Assistance Listing Numbers, pass-through information when applicable, amounts provided to subrecipients and required note disclosures.

For many FQHCs, the problem is not the final spreadsheet. It begins upstream. Awards may be established without consistently documenting the original Federal source, ALN, pass-through status, period of performance, or subrecipient responsibilities. Award modifications may not be communicated to accounting timely, and decentralized grant administration can leave finance reconstructing award activity at year-end.

When that happens, the SEFA becomes a reconstruction exercise instead of a controlled reporting output. The result can affect major program determination, audit scope, timing, and, in some cases, financial statement adjustments or compliance findings.

A stronger approach is to treat SEFA preparation as a year-round process. Standardized grant intake procedures and a centralized grants log help ensure key award attributes are captured at the outset and updated throughout the life of the award.

Funding Overlap

Allowability and allocability remain recurring risk areas, particularly where grant expenditures intersect with reimbursement-based funding streams. When grants, claims activity, and supplemental funding are managed in separate workflows, the risk of duplicate charging or unsupported allocation increases significantly.

This issue is not limited to one funding source or one period of emergency relief. It is a broader control problem. If no one is reconciling the relationship between grant-funded expenditures and reimbursement activity, questioned costs become more likely. From a single audit perspective, which can affect both compliance testing and conclusions related to internal controls.

Health centers can reduce this risk by implementing a control process that ties grant-funded costs, claims activity, and other supplemental reimbursement streams together before costs are reported. That process should include clearly assigned ownership, periodic review of potentially overlapping charges, and documentation supporting allowability and allocability as costs are incurred—not after audit requests are received.

Award Classification

FQHCs also continue to encounter issues in distinguishing between direct awards, pass-through awards, and amounts passed through to subrecipients. Common reporting errors include incomplete expenditure reporting, incorrect pass-through identifiers, missing subrecipient disclosures, and failure to identify the original Federal source of funding.

These are not merely presentation issues. They directly affect SEFA accuracy, major program determination, and the auditor’s testing approach. They also influence how Federal agencies, and pass-through entities evaluate the organization’s reporting.

A practical solution is to classify each award at intake. Every award should be documented up front as direct, pass-through, or subrecipient-related, with the original Federal source, ALN, pass-through entity, and related responsibilities recorded in a centralized grants log. Subrecipient monitoring should likewise be tracked outside of the award agreement itself so that finance, grants, and program teams are working from the same information throughout the year.

If award status has to be inferred after year-end from reimbursement records or narrative program descriptions, the organization is already behind.

Recurring issues in these areas are familiar. Payroll or other expenditures may be charged to a grant when the underlying activity falls outside the award’s approved purpose. Allocation methodologies may be outdated or poorly supported. Grant draws may not be reconciled to the general ledger and grant records. Costs may be charged outside the allowable award period when continuation periods or award modifications are not communicated to accounting timely. Procurement files may lack support for vendor selection, price reasonableness, or suspension and debarment checks. Reporting may be late, inconsistent, or unsupported, particularly when financial reporting and operational reporting are not reconciled.

Special tests and provisions can be especially challenging because they are program specific. For FQHCs, this often relates to the Sliding Fee Discount Program, where findings may result from inconsistent application of policy, system setup that does not align with written procedures, or documentation that does not support eligibility and discount calculations.

These issues persist not because the rules are unclear, but because compliance is often treated as a year-end exercise rather than an operating discipline.

Internal Controls

Perhaps the most important readiness issue is how the organization views the single audit itself. Many still see it primarily as a test of balances and compliance. In reality, it is also a test of the internal control environment surrounding financial reporting and Federal awards.

For leadership, readiness is not demonstrated by producing documents quickly during fieldwork. It is demonstrated by having clear ownership over grant intake, SEFA preparation, allowability review, award classification, reimbursement reconciliation, and reporting. Those processes should be documented, consistently performed, and supported by a reliable audit trail.

If controls are informal, dependent on specific personnel, or not performed consistently throughout the year, repeat findings become much more likely—even in otherwise strong finance environments.

Year-Round Readiness

FQHCs that perform well in single audits are rarely the ones with the fewest awards. More often, they are the organizations with the strongest cross-functional discipline. Readiness requires more than technical knowledge of Uniform Guidance. It requires processes that connect grants, reimbursement, accounting, and compliance in a way that produces complete and supportable reporting throughout the year.

The practical takeaway is straightforward: do not wait until audit season to determine whether your grants, reimbursement activity, and accounting records tell the same story.