Home / Resources / 2 CFR 200.501 explained
Plain-English guide · for nonprofits
2 CFR 200.501, explained in plain English
Updated September 2026
Under §200.501, you must have a single audit if you expend (spend, not receive) $1,000,000 or more in federal awards in your fiscal year. Below that you are exempt from the audit, but not from the other rules.
Where it sits
2 CFR Part 200 is the Uniform Guidance, the rulebook for federal awards to states, local governments and nonprofits. Subpart F is the audit subpart, and §200.501 is its front door: it decides who is in and who is out. If you land inside it, the rest of Subpart F applies to you. If you don't, you are exempt from its audit requirements, though your records must still be open for review.
The threshold, verbatim
“A non-Federal entity that expends $1,000,000 or more during the non-Federal entity's fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part.”
And the other side of it:
“A non-Federal entity that expends less than $1,000,000 in Federal awards during its fiscal year is exempt from Federal audit requirements for that year, except as noted in §200.503.”
Exempt from the audit requirement, not from the rules. Your records must still be available for review, and every other part of the Uniform Guidance you agreed to still binds you.
“Expends” is the whole game
The threshold is not about how much you were awarded, how much sits in your bank account, or how much a multi-year grant is worth in total. It is about activity in one fiscal year. §200.502 sets the test:
“The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs.”
Two things §200.502 counts can surprise you. Money you pass on to subrecipients counts, when you disburse it. And non-cash help counts: property, food commodities and insurance you receive under a federal program. Donated property and commodities count at fair market value when you receive them, or at the value the federal agency gives. Insurance counts for the period it is in force. Free rent on its own does not count, but it does when you receive it as part of a federal program award. The full list is at §200.502, what counts as expended.
The three answers to “do we need one?”
Under $1,000,000: no federal audit required
§200.501(e). Keep your records available. Note that a funder or a state can still require an audit by contract, which is a separate obligation from this one.
$1,000,000 or more, one program only: you may elect a program-specific audit
§200.501(c) allows it on two conditions. You expend awards under only one federal program, excluding research and development. And neither the program's rules nor your award terms require a financial statement audit.
$1,000,000 or more, more than one program: single audit
§200.501(b). Conducted under §200.514.
Passed-through money counts, and it counts for you
“An auditee may simultaneously be a recipient, a subrecipient, and a contractor. Unless a program is exempt by Federal statute, Federal awards expended as a recipient or a subrecipient are subject to audit under this part.”
This is the paragraph to read twice. A federal grant you received through a state agency, a city, or a larger nonprofit is still a federal award, and it still counts toward your threshold. An organization that thinks it has no federal funding may be a subrecipient that has not made the connection.
Money you received as a contractor is different. Under §200.501(g), payments you receive for goods or services as a contractor are not subject to audit under this part, and §200.501(h) says that, in most cases, your compliance job for a contractor is to make sure the purchase itself follows the rules. The distinction between subrecipient and contractor is set out in §200.331, and it is decided by the substance of the relationship, not by what the agreement is called.
Common slips, and the fix
- Counting awards instead of expenditures. A three-year $1.2M award is not a single-audit trigger in year one if you only spent $400,000 of it.
- Missing pass-through funds. The state grant or subaward nobody thought of as federal.
- Forgetting non-cash. Donated property and commodities count at fair market value, and federal insurance counts while it is in force.
- Using $750,000. Guidance written before the 2024 revision still carries the old threshold.
- Finding out in month eleven. A single audit takes planning, an auditor with Subpart F experience, and a schedule of expenditures of federal awards you can actually produce. Track the running total through the year, not at year end.
What to do with this
Keep a running total of federal awards expended, by program, updated monthly, using the §200.502 definition rather than a cash figure. If it is heading anywhere near $1,000,000, talk to an auditor early. If it is comfortably under, you still need the records, and you still need the compensation documentation at §200.430 if you pay anyone from a grant.
This is general information, not legal or accounting advice. Federal grant rules change and are applied differently by different agencies and auditors. Check with your auditor, your grant officer, or an attorney before relying on any of it.
The Ember tool for thisEmber Budget
Ember Budget tracks money in and out by program and keeps restricted funds apart from flexible funds. Unlimited users on every tier.
Sources: 2 CFR Part 200 (eCFR), §200.331, §200.501 and §200.502; for the $750,000 threshold's start, the 2013 final rule, 78 FR 78590, §200.110(b); and for the fiscal-year timing of the $1,000,000 threshold, OMB's 2025 Compliance Supplement, Part 1. Verified 28 September 2026. Read the sections themselves before relying on any summary.