DATE: January 25, 2021

TO: Local Public Agencies and their Independent Auditors

FROM: LHTAC

RE: When a Single Audit is triggered by local participation in a federal aid project

The 2 CFR 200 Single Audit requires entities that receive more than $750,000 of federal funds in a given year, to undergo the Single Audit. There has been some confusion in the past as to whether Federal Aid funds, Stimulus funds, and Governor’s Discretionary are included in the $750,000 threshold. Part of the confusion has been with how to handle the asset once it is turned over to the local entity. Some auditors feel you need to record all project costs, which may exceed the $750,000 threshold.

In 2010, LHTAC requested the opinion of the Federal Highway Administration (FHWA) who submitted the question to the Governmental Accounting Standards Board (GASB). The GASB response was simply that the local entity is only responsible to report on the dollars they touch directly. So, at most this would be the amount of funds they are reimbursed for design services and construction funds.

Per GASB and FHWA, the local entity is only responsible to report the design and construction dollars the local entity has paid out and been reimbursed for as a sub-recipient. Continuing on with this thought, for most projects the Idaho Transportation Department (ITD) pays the contractor for the construction costs and reimburses the local for the design costs minus the local share. Furthermore, ITD considers these design funds as being administered by a co-effort between ITD and LHTAC and does not report these reimbursements of locals to the Idaho Division of Financial Management as federal payments. Local entities and their independent auditors should consult the Idaho Division of Financial Management Single Audit Report Generator: www.dfm.idaho.gov/singleauditv2/ to see what federal funds a local entity has received for the year. Per GASB, the local entity will not have to undergo a Single Audit because of federal aid projects. It is important to understand this to ensure that your entity doesn’t undergo an unnecessary Single Audit, when one is not required. It is the responsibility of ITD or LTHAC to report the construction and other project dollars, not the local entity.

In terms of the GAAP standards for recording the asset, “The local government would report the total cost of the project as an asset on their statement of net assets. The credit side of the entry would be to an intergovernmental revenue and classified as program revenue: capital grants and contributions on the statement of activities. In the
governmental funds, only the amount for preliminary design would be reported as an expenditure. The donation of the remaining part of the project would not be reported in governmental funds because it does not constitute a flow of financial resources.”

Single Audit Memo (PDF)