Knowledge and Insights

Artificial intelligence is all over the news for a variety of different reasons, and the federal government is among the latest to adopt use of this rapidly advancing technology. While discussions surrounding AI in the accounting industry often focus on financial reporting, fraud detection, or cybersecurity, one area receiving increasing attention is federal grant oversight and the review of Single Audit submissions.

The Federal Audit Clearinghouse (FAC), which serves as the federal repository for Single Audit reporting packages and Data Collection Forms (SF-SACs), has received technology investments in recent years, and federal agencies are using that technology to analyze large volumes of audit data more efficiently and identify areas of elevated risk. According to public presentations by the Government Accountability Office (GAO), AI tools are already being used to help classify and analyze Single Audit findings across thousands of audit reports, making it easier to identify recurring deficiencies and potential compliance concerns.

WHAT THIS MEANS FOR YOUR ORGANIZATION

GREATER SCRUTINY OF DATA COLLECTION FORMS

Historically, the Data Collection Form served primarily as a mechanism to provide standardized information about an entity’s federal expenditures, audit results, and compliance findings.

Recent proposals to enhance FAC reporting include the collection of more structured and standardized information related to audit findings. This structured data enables advanced analytical tools, including AI applications, to identify patterns that would be difficult to detect through manual review alone.

For organizations submitting Single Audits, this means accuracy and consistency within the Data Collection Form may become increasingly important. Errors, omissions, or inconsistencies that previously may have gone unnoticed could become more visible as automated review tools continue to evolve.

IDENTIFICATION OF RECURRING FINDINGS

One of the most significant developments in the use of AI-powered analysis is the ability to review years of audit data across thousands of organizations within seconds. Federal agencies can evaluate whether findings are recurring, identify common compliance weaknesses, and assess whether corrective actions have been effective.

Organizations with repeat findings should expect increased attention from grantor agencies and should prioritize timely corrective action plans and documentation demonstrating remediation efforts.

ENHANCED RISK ASSESSMENT CAPABILITIES

Federal oversight has traditionally relied on a combination of desk reviews, monitoring activities, and evaluation of FAC submissions. AI is giving government agencies the ability to analyze these datasets collectively and more efficiently.

Rather than reviewing audit submissions individually, government agencies can evaluate broader trends across industries, geographic regions, specific federal programs, and types of compliance findings. This may result in earlier identification of emerging risks and more targeted monitoring of grant recipients.

Organizations should anticipate that federal reviewers may arrive at monitoring activities with greater insight into historical findings, program risks, and comparisons to peer organizations than ever before.

LOOKING FORWARD

Although AI is unlikely to replace professional judgment in the audit and oversight process, it is becoming a powerful tool for identifying trends, prioritizing reviews, and directing government resources toward higher-risk areas.

For nonprofit organizations, educational institutions, governmental entities, and other federal funding recipients, this shift reinforces the importance of strong internal controls, accurate reporting, and timely resolution of audit findings. Organizations should view the Data Collection Form not simply as a filing requirement your auditors assist with at the conclusion of the audit, but as a key data source that may be used to inform future oversight activities.

OUR TEAM IS HERE TO HELP

The future of federal oversight is becoming increasingly data-driven. Organizations that invest in strong compliance practices today will be better positioned to succeed as government agencies continue embracing advanced analytics and artificial intelligence in the years ahead.

Mercadien’s Nonprofit and Human Services Group closely monitors developments affecting Single Audits, Uniform Guidance compliance, and federal grant oversight. Our professionals are trained in today’s data-driven environment and can help organizations evaluate their readiness for increasing regulatory expectations, improve compliance reporting processes, and navigate the evolving landscape of federal grant accountability.

DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice and may not be used or relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.