Which rules apply
- Single Audit. 2 CFR 200.501 requires a Single Audit when you spend $1,000,000 or more in federal awards in a fiscal year. The level applies to fiscal years beginning on or after October 1, 2024. It counts all federal funds, not just Head Start. Check your status with our Single Audit checker.
- Uniform Guidance. 45 CFR 1303.3 applies 2 CFR parts 200 and 300 to all Head Start grants. HHS moved from 45 CFR Part 75 to 2 CFR 200 and 300 on October 1, 2025. Older guides that cite Part 75 or a $750,000 threshold are out of date.
- Head Start Act §647. 42 U.S.C. 9842 requires records that allow an effective audit, an annual accounting of administrative expenses, and a copy of the management letter and Head Start findings to HHS within 30 days after the audit is completed.
- Governing body. HeadStart.gov summarizes Head Start Act §642: the governing body reviews and approves the annual audit, and the audit is shared with the Policy Council.
Head Start fiscal rules the audit tests
The Program Performance Standards set fiscal limits that auditors and federal reviewers look at:
- 20% non-federal match. Under 45 CFR 1303.4, federal funds cannot exceed 80% of approved program costs. You must contribute 20% as non-federal match each budget period, unless HHS approves a waiver. In-kind match needs support for its value.
- 15% development and administrative cap. Under 45 CFR 1303.5, costs to develop and administer the program cannot exceed 15% of total approved program costs, federal and non-federal combined, unless HHS approves a waiver.
- Cost principles. Costs charged to the grant must be allowable, allocable and reasonable under 2 CFR 200 Subpart E.
- Correcting findings. 45 CFR 1302.102(b)(1)(iv) requires procedures that prevent prior audit findings from recurring.
Findings that can trigger competition
Under the Designation Renewal System, 45 CFR 1304.11(g) requires a grantee to compete for its next five years of funding if it meets either fiscal condition:
- It is at risk of failing to continue as a going concern, based on an audit or a federal or state review.
- It has two or more audit findings of material weakness or questioned costs tied to Head Start funds in audits filed with the Federal Audit Clearinghouse during the current project period.
This is why timely corrective action plans matter. The auditee must also prepare a summary schedule of prior audit findings each year.
How it works with us
Best for: Head Start and Early Head Start grantees, delegate agencies and child care providers that receive federal funds.
- Free initial consultation. Share your federal award list, fiscal year end and last audit report.
- Fees quoted upfront, in writing. Transparent, fair fees in an engagement letter. Federal rules require free and open competition when you procure audit services, and we respond to RFPs.
- Planning. We identify major programs using the current Compliance Supplement and review prior findings.
- One request list. Match records, cost allocation, payroll and grant draw support.
- Fieldwork, done remotely. Financial statement audit plus compliance and internal control testing.
- Report and filing. We present to the governing body and help you file with the Federal Audit Clearinghouse.
See also our Single Audit services and Single Audit checklist.
Head Start audit requirements by funding level
| Federal spending in the fiscal year | Audit type | Deadline |
|---|---|---|
| $1,000,000 or more (fiscal years beginning on or after Oct. 1, 2024) | Single Audit under 2 CFR 200 Subpart F (financial statements, compliance and internal control) | Federal Audit Clearinghouse: earlier of 30 days after the report or 9 months after year end (2 CFR 200.512) |
| $1,000,000 or more | Management letter and Head Start findings sent to HHS | Within 30 days after the audit is completed (Head Start Act §647(c)(2)) |
| Under $1,000,000 | Exempt from the federal audit requirement; records must stay available for review (2 CFR 200.501(e)) | Any audit required by your grant terms, state, funders or bylaws follows that deadline |
| Any level | Governing body reviews and approves the annual audit (Head Start Act §642) | No date set in the Act; schedule board review once the report is issued |
Expert CPAs. Personal attention.
Running a Head Start or Early Head Start program? Share your federal award list in a free initial consultation and we'll confirm your audit requirements and timeline.
Frequently asked questions
Yes, if your organization spends $1,000,000 or more in federal awards in its fiscal year, counting Head Start and all other federal funds together (2 CFR 200.501, for fiscal years beginning on or after October 1, 2024). Most Head Start grantees cross that level. Below it, you are exempt from the federal audit requirement, but your records must stay available for review.
The reporting package goes to the Federal Audit Clearinghouse by the earlier of 30 calendar days after you receive the auditor's report or nine months after your fiscal year end (2 CFR 200.512). The Head Start Act also requires you to send HHS the management letter and any Head Start findings within 30 days after the audit is completed.
Yes. Under 45 CFR 1304.11(g), a grantee must compete for its next five years of funding if it has two or more audit findings of material weakness or questioned costs tied to Head Start funds in audits filed with the Federal Audit Clearinghouse during the project period, or if an audit shows it is at risk of failing to continue as a going concern.
Yes. HeadStart.gov summarizes Head Start Act section 642 as requiring the governing body to review and approve the annual financial audit, and the audit must be shared with the governing body and the Policy Council.
It depends on how the money reaches you. Federal awards you receive as a recipient or subrecipient count toward the $1,000,000 threshold. Payments you receive as a contractor or vendor for goods or services generally do not (2 CFR 200.501(g)). Ask the state agency or pass-through entity how it classifies your payments, and get the answer in writing.
HHS adopted the Uniform Guidance at 2 CFR Part 200, with HHS-specific provisions at 2 CFR Part 300, effective October 1, 2025. The Head Start Program Performance Standards at 45 CFR 1303.3 now point to 2 CFR parts 200 and 300.
Sources
- eCFR: 2 CFR 200.501 Audit requirements
- eCFR: 2 CFR 200.512 Report submission
- eCFR: 45 CFR Part 1303 Financial and administrative requirements
- eCFR: 45 CFR 1304.11 Designation Renewal System conditions
- Head Start Act §647, 42 U.S.C. 9842 (Records and audits)
- HeadStart.gov: Financial Audits, Key Regulations and Tips
- Federal Audit Clearinghouse
General information as of October 10, 2026. Tax rules change; talk to a CPA about your situation.