| Dear Center Members: |
This GAQC Alert informs you about the following important matters:
- Updated information about the programs expected to be included in the 2020 Office of Management and Budget (OMB) Compliance Supplement Addendum (Supplement addendum) and the latest on expected content and timing;
- Revised reporting and other guidance for the Provider Relief Fund (PRF) has recently been issued by the U.S. Department of Health and Human Services (HHS);
- Changes to upcoming GAQC Web event dates on the Supplement addendum and an audit primer for auditors of for-profit entities receiving PRF funding, and registration information;
- New illustrative report language for situations where comparative financial statements are presented and only one of the fiscal years is audited in accordance with Government Auditing Standards;
- New implementation guidance has been issued by the AICPA relating to the ethics interpretation, State and Local Government Client Affiliates (SLG Affiliates); and
- Two new guides have been issued by the U.S. Department of Education (ED) for lenders and lender servicers.
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Supplement Addendum Update
GAQC staff and Executive Committee members have been busy reviewing and providing feedback to OMB on various drafts of the program sections to be included in the 2020 Supplement addendum. We are working hard to advocate that what is ultimately released by OMB will be useful to auditors. During this process, OMB notified us that three programs that were expected to be included the Supplement addendum (one new program and two existing programs) will not be included. Those programs are listed below and have been removed from the nonauthoritative GAQC document, Federal Programs Expected to be Included in the 2020 OMB Compliance Supplement Addendum.
- Assistance Listing 93.697 - Rural Health Clinic Testing (new COVID-19 program)
- Assistance Listing 14.218 - Community Development Block Grant (existing program)
- Assistance Listing 14.231 - Emergency Solutions Grant Program, Homelessness Assistance (existing program)
If you will be auditing Assistance Listing 93.697 as a major program, you will need to refer to Part 7 of the 2020 Compliance Supplement, Guidance for Auditing Programs Not Included in This Compliance Supplement, to develop your audit approach. As it relates to Assistance Listings 14.218 and 14.231, they were originally planned for inclusion in the Supplement addendum because of COVID-19-related changes to requirements. If you are auditing either of these programs as a major program, you will need to use the specific program section included in the already released 2020 Supplement and then refer to Appendix VII, Other Audit Advisories, which requires auditors to perform reasonable procedures to ensure that the compliance requirements identified as subject to audit are current. Appendix VII also includes a reminder for auditors to be alert that the original terms and conditions of existing programs may have been modified to include additional compliance requirements not included in original terms and conditions or the types of compliance requirements noted as subject to audit.
We still believe the earliest the final Supplement addendum will be released is late November. OMB is currently working with the key agencies to finalize the Supplement addendum content and work through the OMB clearance process. In addition to the new programs and changes to existing programs that will be included in the addendum, we also expect OMB to address the impact on a single audit of donated personal protective equipment coming from a federal source, as well as a potential revision to Part 3 for the Reporting type of compliance requirement. Finally, we have continued to push hard for an audit submission deadline extension for audits impacted by COVID-19 with June 30 through September 30, 2020, year-ends. OMB and the agencies are considering that request now. If an extension is to be provided, it will be announced in the Supplement addendum. Stay tuned.
PRF News
If your clients have received funding from the PRF program, you are already aware that HHS has continually been updating and revising related programmatic and reporting guidance. This trend has continued with the issuance of the following items in the last several weeks that you should review closely if you audit clients participating in this program:
- On October 22, 2020, HHS issued revised, General and Targeted Distribution Post-Payment Notice of Reporting Requirements, which changed the requirements from those released on September 19, 2020 (see GAQC Alert #416 for more information about the problems with the September guidance). In its Reporting Requirements Policy Update, HHS explains the rationale for changing the requirements as a result of feedback received from various stakeholders voicing concerns. The revised reporting requirements allow healthcare providers to apply PRF awards to lost revenues based on year-over-year patient care revenues (after applying the PRF awards to healthcare related expenditures attributable to COVID-19).
- On October 28, 2020, HHS updated its PRF Frequently Asked Questions which resulted in the addition of numerous new questions. Of particular interest are new questions in the Audit and Reporting section that discuss how an entity would calculate the “expenses attributable to coronavirus not reimbursed by other sources.” You can identify new questions added by searching for “10/28.”
- On November 2, 2020, HHS issued a clarification to the October 22, 2020, document referred to above. In a new FAQ (search for 11/2 to find it), HHS states that healthcare related expenses are no longer netted against the patient care lost revenue amount in Step 2 on page 1 of the reporting requirements announcements from October 22nd.
GAQC Web Event Changes
We informed you in GAQC Alert #416 that we planned to hold two GAQC events in November, but we also cautioned that we may have to revise the dates due to various uncertainties. We have decided to push the dates of the two events further out to ensure we present you with the most up-to-date and hopefully final information. The revised dates and times are provided below. You can start registering now using the registration links below. Be sure to use discount code XXXX to get your member discount. We are still not able to offer the no-CPE option during the live event but will strive to make the archive of each event available within a few days.
December 10, 2020, Supplement Addendum and COVID-19 Implications (from 1:00 PM – 3:00 PM Eastern Time). This event will be a follow-on to previous GAQC events and will cover OMB's Supplement addendum, as well as the latest COVID-19 audit implications. Register now!
December 15, 2020, An Audit Primer for Auditors of For-Profit Entities Receiving HHS Provider Relief Funds (from 2:00 – 4:00 PM Eastern Time). Many for-profit entities will be subject to HHS audit requirements for the first time. This event will provide auditors with information and best practices about these engagements. Note the slight change to the time of this event from our normal 1:00 PM – 3:00 PM window. Register now!
Illustrative Report Language Due to the pandemic-related increase in new single audits, there are also likely to be many more entities that will be required to have their financial statements audited in accordance with Government Auditing Standards for the first time. We have received several questions from members regarding how the financial statement audit reports illustrated in the 2020 edition of the AICPA Audit Guide, Government Auditing Standards and Single Audits (GAS-SA Guide), should be revised when comparative financial statements are presented by an entity but only one year of the presentation is audited in accordance with Government Auditing Standards. Below are the GAQC’s nonauthoritative suggestions for report wording revisions to a financial statement audit report using excerpts from Example 4-2 in the GAS-SA Guide (revisions are bolded and underlined).
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of Example NFP, which comprise the consolidated statement of financial position as of June 30, 20X2 and 20X1, and the related consolidated statements of activities, and cash flows for the years then ended, and the related notes to the financial statements.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. For the year ended [insert year end], we also conducted our audit in accordance with the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
SLG Independence Resources
The AICPA Professional Ethics division has issued, Implementation Guide: State and Local Government Client Affiliates, and three other related tools to assist auditors in implementing the SLG Affiliates interpretation. These practice aids will help you understand which entities are affiliates of your state and local government audit clients. If you identify an affiliate, you’ll need to be independent of that entity. This implementation guidance can also help you to recognize circumstances or relationships where you might need to consult the “Conceptual Framework for Independence.” The three tools included in the Implementation Guide are as follows:
While the effective date of the SLG Affiliates interpretation may seem far off (it has recently been extended to be effective for periods beginning after December 15, 2021), keep in mind that you will need to be independent when your client’s fiscal year begins. Therefore, 2021 should be the time you begin evaluating potential affiliate relationships to ensure you will be compliant when the effective date arrives in 2022.
ED Guides Issued
In late September, ED issued two updated guides as follows:
The 2020 editions of both guides supersede previous versions issued in 2011 and are effective for fiscal years ending on or after June 30, 2021. Changes made by ED are primarily intended to make needed updates for regulations and standards issued since 2011 and to align the guides with other more current ED audit and attestation guides. Auditors performing these engagements should carefully review the guides and related transmittal letters to more fully understand the changes. * * * * *
Sincerely,
AICPA Governmental Audit Quality Center |
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| To assist with staff training needs due to the pandemic-related increase in new single audits, a no-CPE archive of the GAQC 4-part single audit fundamentals series of Web events is available. Alternatively, register now for the next CPE offering on December 17-18, 2020. |
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| Last Chance! |
| Only two opportunities left to view the required 2020 GAQC Annual Update Webcast for CPE. Register now for either December 11, 2020, or January 8, 2021, from 1:00 PM to 3:00 PM (Eastern Time). Use “XXXX” discount code at checkout for member pricing. Don’t want CPE? Listen to the no-CPE archive. |
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