BACKGROUND The Single Audit Act provides a mechanism for improving the management of federal financial assistance programs by mandating that federal fund recipients follow compliance requirements and that monies are spent in accordance with program regulations and laws. The Single Audit Act applies to states, local governments, and nonprofit organizations that expend $500,000 or more within a fiscal year in federal financial assistance. Audits performed under the Single Audit Act are more extensive than audits of an organization's financial statements Free Trees, Inc. is a nonprofit organization that focuses on planting trees in open areas. For many years, it operated with a budget of approximately $600,000, almost all from private donations. Under various federal stimulus programs in 2010, Free Trees received three different grants. One came directly from the EPA (a federal program) for $410,000; a second came from the USDA (also a federal program) for $72,000; a third came to Free Trees as the subrecipient for $20,000 from the State of llinois, which acted as a pass- through entity. All funds received were expended. 1. Is Free Trees required to have a Single Audit in 2010? 2. Why or why not? 3. What if the funds from the State of Illinois were paid to Free Trees as an independent contractor? Would that change the situation? BACKGROUND The Single Audit Act provides a mechanism for improving the management of federal financial assistance programs by mandating that federal fund recipients follow compliance requirements and that monies are spent in accordance with program regulations and laws. The Single Audit Act applies to states, local governments, and nonprofit organizations that expend $500,000 or more within a fiscal year in federal financial assistance. Audits performed under the Single Audit Act are more extensive than audits of an organization's financial statements Free Trees, Inc. is a nonprofit organization that focuses on planting trees in open areas. For many years, it operated with a budget of approximately $600,000, almost all from private donations. Under various federal stimulus programs in 2010, Free Trees received three different grants. One came directly from the EPA (a federal program) for $410,000; a second came from the USDA (also a federal program) for $72,000; a third came to Free Trees as the subrecipient for $20,000 from the State of llinois, which acted as a pass- through entity. All funds received were expended. 1. Is Free Trees required to have a Single Audit in 2010? 2. Why or why not? 3. What if the funds from the State of Illinois were paid to Free Trees as an independent contractor? Would that change the situation