| Dear Center Members: |
The purpose of this GAQC Alert is to inform you about the following:
- The GAQC's comment letter on proposed revisions to Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance or UG);
- New Novel Coronavirus (COVID-19) extensions provided by the U.S. Department of Agriculture (USDA), the Government National Mortgage Association (Ginnie Mae), and the Government Finance Officer's Association (GFOA);
- An announcement by the Governmental Accounting Standards Board (GASB) that it is adding a project to consider postponing effective dates of certain standards due to the effect of COVID-19; and
- Other AICPA COVID-2019 Resources.
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UG Comments
On March 25, 2020, the GAQC issued comprehensive comments to the Office of Management and Budget (OMB) on its notice of Proposed Guidance titled, Guidance for Grants and Agreements. We informed you about these proposed revisions in GAQC Alert #395. The GAQC supported the overall update of the regulation; however, we offered a number of comments that need OMB consideration before the final regulation is issued.
Among the areas where GAQC expressed significant concerns are the following:
- Effective Date. It is not clear how the proposed effective date would be operationalized and whether federal agency action by some or all agencies will be needed for it to become effective.
- Revised Definitions of Internal Control. Changes to the definitions of internal control are problematic and do not align with the audit requirements in the Uniform Guidance.
- Period of Performance. This is an area that is already challenging in practice and the proposed changes add confusion, particularly as it relates to whether the auditor would be testing cutoff of the overall award period or whether they would be testing cutoff with the budget period.
- Procurement. OMB should consider removing auditor requirements around the testing of compliance with the micro-purchase and simplified acquisition threshold requirements going forward due to delays that we believe will continue around when the Federal Acquisition Regulations are updated for increased thresholds versus when those thresholds are updated by law.
- Single Audit Study of Audit Quality. The proposal continued the requirement for an audit quality study but pushed the date to audits submitted in 2021. The GAQC recommended that OMB delete the regulatory requirement for this study in the Uniform Guidance as we believe there are more efficient, effective, timely, and less costly ways for the goal of this provision to be met; many of which are already ongoing. If retained, OMB should push the date of the audit submissions to be covered by the project to 2023 due to the current COVID-19 situation.
We would like to thank the members of our GAQC Executive Committee (EC) and several other former members who spent many hours combing through the proposed changes to this regulation during this trying time. Our EC members frequently take on behind-the-scenes projects like this on behalf of all members and their efforts are greatly appreciated!
Additional COVID-19 Extensions
USDA. The USDA Office of Rural Development (RD) issued a Stakeholder Announcement, USDA Implements Immediate Measures to Help Rural Residents, Businesses and Communities Affected by COVID-19, which formalizes their guidance (previously communicated in GAQC Alert #401) whereby a 60-day audit extension is provided for electric and telecommunication borrowers and grantees. The announcement also provides new extension guidance for USDA's Multifamily Housing program and states that Section 515 annual financial statements due to RD on March 31, 2020, will be extended 30 days. Auditors should consider making clients subject to these UDSA rules aware of the announcement as it also includes other waivers and extensions in various areas including tenant certifications, late fees on mortgages, and more.
Ginnie Mae. We informed you in GAQC Alert #399 that the U.S. Department of Housing and Urban Development (HUD) provided audit submission extensions for lenders and multifamily housing entities subject to the audit requirements in chapters 3 and 7 of the HUD Consolidated Audit Guide (HUD Guide). Earlier this week, Ginnie Mae announced its own extension in All Participant Memorandum (APM) 20-02: Annual Audited Financial Statement Deadline Extension. This extension is applicable to lenders subject to chapter 6 of the HUD Guide and provides an extension of the due date for annual audited financial statements to April 30, 2020, for those lenders with a December fiscal year end. However, it encourages lenders that can complete the Annual Audited Financial Statements within 90 days after the end of their fiscal year to do so.
GFOA. If you have governmental clients that participate in various GFOA certificate programs, including the GFOA Certificate of Excellence in Financial Reporting program, you should consider informing your clients that GFOA will be granting extensions as needed. GFOA has asked that any entity that anticipates a delay to apply for an extension at: https://www.gfoa.org/request-extension.
GASB Considers Extensions
The GASB has announced in a press release that it has added a project to its current technical agenda to consider postponing all Statement and Implementation Guide provisions with an effective date that begins on or after reporting periods beginning after June 15, 2018. The GASB has received numerous requests from state and local government officials and public accounting firms regarding postponing the upcoming effective dates of pronouncements. Most notably, those pronouncements include GASB Statement No. 84, Fiduciary Activities, and GASB Statement No. 87, Leases, as well as their related Implementation Guides. An exposure draft is expected in April 2020 and a final standard in May 2020. The GAQC will provide updates on this project as it progresses.
Other AICPA COVID-19 Resources
The AICPA's Center for Plain English Accounting (CPEA), which serves as the National A&A Resource Center for CPEA member firms, has issued a Special Report, Consequences of COVID-19 Financial Reporting Considerations, which provides reminders to practitioners about certain financial reporting matters that may need to be considered in light of the COVID-19 pandemic. While it relates primarily to requirements of the Financial Accounting Standards Board, auditors of governmental entities may also find it informative.
An article in the Journal of Accountancy, How to Test Inventory Without a Site Visit. This topic has been an area the AICPA has received many questions on in light of the current COVID-19 situation.
The AICPA has also launched an AICPA COVID-19 Resource Center with free learning resources, advocacy and tax efforts, news and other topics related to COVID-19. This Web site also links to the various GAQC Alerts we have been issuing on this topic.
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Sincerely,
AICPA Governmental Audit Quality Center
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