| Dear Center Members: |
On June 18, 2020, the Office of Management and Budget (OMB) issued Memorandum M-20-26, Extension of Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations, which should be of interest to those subject to and performing single audits. This GAQC Alert covers the contents of the memo including:
- Changes to the single audit submission extensions previously provided including a reversal of position by OMB on the 6-month extension for certain year-ends;
- A continuation of provisions relating to the allowability of salaries and other project activities through September 30, 2020;
- A new directive to inform recipients to exhaust other funding sources to preserve federal funds for the ramp-up effort;
- Clarification that "double-dipping" is not appropriate; and
- A new requirement for separate presentation of "COVID Emergency Acts funding" on the schedule of expenditures of federal awards (SEFA).
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Background
When M-20-17, Extension of Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations, was issued by OMB in March 2019, OMB indicated that it would revisit the flexibilities provided in that memo within 90 days (see GAQC Alert #401 for more information on M-20-17). The issuance of M-20-26, which is addressed to the federal agencies, represents OMB's revisit of M-20-17. The new memo significantly reduces the flexibilities provided in M-20-17 and rescinds it. M-20-26 states that it will expire on September 30, 2020, and questions about the memo should be sent to GrantsTeam@omb.eop.gov.
Changes to Submission Extensions
M-20-17 had provided a blanket 6-month single audit extension for recipients and subrecipients with fiscal year-ends through June 30, 2020, that had not filed their single audits with the Federal Audit Clearinghouse (FAC) as of the date of the memo (i.e., March 19, 2020). M-20-26 significantly changes the previous extensions provided. Unfortunately, the memo only describes the new rules without clearly explaining what has changed. The following includes our analysis of the changes:
- A blanket 6-month submission extension continues to be offered for single audits not yet submitted at March 19, 2020, with normal due dates from March 30, 2020, through June 30, 2020 (i.e., June 30, 2019, year-ends through September 30, 2019, year-ends);
- The blanket submission extension for audits with normal due dates from July 31, 2020, through September 30, 2020, (i.e., October 31, 2019, year-ends through December 31, 2019; year-ends) has been reduced to 3-months; and
- The previous 6-month audit submission extension for year-ends after December 31, 2019, and through June 30, 2020 year-ends, has been rescinded (i.e., 2020 year-ends in January, February, March, April, May, and June). We have confirmed with OMB that this was their intent. These single audits will now have to be submitted to the FAC within the normal due date provisions of the Uniform Guidance.
Recipients and subrecipients able to take advantage of the above extensions can still qualify as a low-risk auditee. Also, no further action by awarding agencies is required to enact the extensions and individual recipients and subrecipients are not required to seek approval for the extension. Finally, M-20-26 continues the requirement that recipients and subrecipients should maintain documentation of the reason for delayed filings.
We believe OMB's rationale for reducing the submission extension timeframes is so that the federal agencies can more readily use the results of single audits as part of their oversight of COVID-19 programs. As we have previously communicated to OMB, the achievement of timely audits is dependent on OMB and the agencies issuing a timely and comprehensive 2020 Compliance Supplement that addresses significant new COVID-19 funding requirements, implications for existing programs, and auditor guidance. We will continue to strongly advocate this message going forward.
Allowability of Salaries and Other Project Activities
M-20-26 instructs that the agencies may continue to allow, through September 30, 2020, recipients to charge salaries and benefits to active federal awards consistent with the recipients' policy of paying salaries (under unexpected or extraordinary circumstances) from all funding sources, federal and non-federal. It also instructs that awarding agencies must require recipients to maintain appropriate records and cost documentation to substantiate the charging of any salaries and other project activities costs related to interruption of operations or services. These provisions are consistent with M-20-17. However, this section of the memo discusses two new areas as follows:
Double-Dipping Not Permitted. The memo clarifies that payroll costs paid with Paycheck Protection Program (PPP) loans or any other federal CARES Act programs must not be also charged to current federal awards as it would result in the federal government paying for the same expenditures twice. This topic has been a commonly asked question, so we are appreciative that OMB has addressed it directly.
Exhausting Other Funding Sources. The memo states that awarding agencies must inform recipients to exhaust other available funding sources to sustain its workforce and implement necessary steps to save overall operational costs (such as rent renegotiations) during the pandemic period in order to preserve federal funds for the ramp-up effort. It also instructs federal agencies that recipients should retain documentation of their efforts to exhaust other funding sources and reduce overall operational costs. We have already started receiving questions on this new provision and will be working to learn more about OMB's intent. We will communicate what we learn in future GAQC communications.
Separate SEFA Identification
The memo states that in order to provide adequate oversight of the COVID-19 Emergency Acts funding and programs, recipients and subrecipients must separately identify the "COVID-19 Emergency Acts expenditures" on the SEFA and in audit report findings. We will also be working to learn more about OMB's intent for this item. Our hope is that more details about this requirement will be provided in the 2020 OMB Compliance Supplement once it is issued. * * * * *
Sincerely,
AICPA Governmental Audit Quality Center |
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