| Dear Center Members: |
The long-awaited Addendum to the 2020 Office of Management and Budget (OMB) Compliance Supplement (the Supplement addendum) has just been released and Congress has also just issued a new COVID-19 Relief Bill. After reading this GAQC Alert you will be aware of the following:
- The effective date of the Supplement addendum and access information;
- How to learn more about the Supplement addendum and its contents including the posting of a no-CPE archive of the recent GAQC Web event on the addendum, as well as two upcoming CPE rebroadcasts to be held on January 7, 2021, and January 27, 2021 (access registration information and use XXXX to get your member discount);
- A reshuffling of the early 2021 GAQC Web event schedule to provide for another timely live Web event covering COVID-19 single audit matters on January 28, 2021;
- A 3-month audit submission extension provided by OMB for audits of entities receiving COVID-19 funding;
- Provisions included in the Provider Relief Fund program (PRF) section (Assistance Listing 93.498) that would affect the timing of inclusion of PRF expenditures and lost revenue on the schedule of expenditures of federal awards (SEFA);
- A new footnote to the SEFA on donated personal protective equipment (PPE) from a federal source;
- A new reporting compliance requirement relating to recipient reporting under the Federal Funding Accountability and Transparency Act (FFATA) that will initially only apply to audits of COVID-19 programs in the Supplement addendum but will be expanded to all selected major programs for audits of fiscal year-ends after September 30, 2020;
- A summary of key items contained in other sections of the Supplement addendum; and
- A look-forward at single audit implications of the new COVID-19 Relief Bill.
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Effective Date and Access Information
The effective date of the Supplement addendum is the same as the original 2020 OMB Compliance Supplement (the August 2020 Supplement)—that is, for audits of fiscal years beginning after June 30, 2019. The addendum must be used in conjunction with the August 2020 Supplement in determining the appropriate audit procedures to support the compliance opinion.
OMB has made the Supplement addendum available in one PDF file on the OMB’s Office of Federal Financial Management Web site. As a public service, the GAQC is currently working to post it on the GAQC Web site by individual section on our GAQC 2020 OMB Compliance Supplement Web page (where the August 2020 Supplement is also posted). Check this Web link in the next day or two to access it by section, along with GAQC observations about each section.
OHow to Learn More
The GAQC held a December 10, 2020, Web event titled, OMB Supplement Addendum and the Latest COVID-19 Single Audit Implications, that was based on a pre-release draft of the addendum that OMB provided us for presentation purposes. The contents of the Web event are consistent with the final Supplement addendum. We strongly recommend those of you that missed the event and your staff that will be working on single audits covering COVID-19 funding listen to it to ensure you have the latest information. Event access information follows:
Change to GAQC Event Calendar
The GAQC is shuffling its Web event calendar to provide another Web event on COVID-19 single audit matters in the near term. This will result in the following change to our event calendar (both events will be held from 1:00 PM – 3:00 PM (Eastern Time)):
- The January 28, 2020, live GAQC Web event will now be our event titled, Single Audit Lightning Round (it had originally been scheduled for March) The event will include a panel of current and former GAQC Executive Committee members responding to commonly asked questions, including many that came in during our December 10, 2020, event on the Supplement addendum
- The March 11, 2020, live GAQC Web event will now cover the Uniform Guidance revisions issued by OMB back in August 2020.
Watch for registration information in future GAQC Alerts. Also, be aware that we may tinker with our Web event schedule even further as things develop on the single audit/COVID-19 front.
Audit Submission Extension
Of great interest to many auditors whose single audits have been on hold, the Supplement addendum includes a 3-month audit submission extension for single audits of 2020 year-ends through September 30, 2020, year-ends only if the recipient received COVID-19 funding. So, for example, single audits of June 30, 2020, where the recipient received COVID-19 funding would now be due June 30, 2021 (instead of March 31, 2021). There is no requirement for individual recipients and subrecipients to seek approval for the extension. However, recipients and subrecipients should maintain documentation of the reason for the delayed filing. See the GAQC’s updated document titled, GAQC Summary of COVID-19 Related Deadline Extensions of Audited Financial Statements and Other Reports, for a full summary of the extensions provided by the addendum for all relevant 2020 fiscal year-ends. Keep in mind that there is only one single audit submission extension left in place for 2019 fiscal year-end audits. That extension resulted from OMB Memo M-20-26 and relates to December 31, 2019, year-end single audits (meeting certain criteria) which are due on December 31, 2020.
SEFA Treatment of PRF
There have been numerous questions about what amounts (i.e., expenditures and lost revenues) should be reported for PRF on the SEFA by recipients for fiscal year-ends prior to December 31, 2020. Those questions have arisen due to guidance issued by the U.S. Department of Health and Human Services (HHS) linking the calculation of those amounts to calendar year-end reporting required to be made directly to HHS by recipients (see GAQC Alert #416 and GAQC Alert #417). These timing questions have been addressed by the inclusion of an “Other Information” section in the PRF section of the Supplement addendum which instructs that PRF expenditures and lost revenue will not be included on SEFAs until December 31, 2020, year-ends and later. This approach will link SEFA reporting for PRF to the amounts to be reported directly to HHS at calendar year-end and again at June 30, 2021. Keep in mind that this timing provision only affects the PRF program and is not applicable to other COVID-19 funding that healthcare entities may have received such as Assistance Listing 93.461, COVID-19 Testing for the Uninsured.
PPE SEFA Footnote
WAppendix VII, Other Audit Advisories, of the Supplement addendum explains that per OMB Memo M-20-20, federal agencies and recipients could donate PPE purchased with federal assistance funds to various entities for the COVID-19 response. This PPE was mostly provided with no compliance or reporting requirements. It goes on to state that nonfederal entities that received such donated PPE should include the fair market value of the PPE at time of receipt in a stand-alone footnote to the SEFA that can be marked “unaudited.” Further, the donated PPE should not be counted by the auditor for purposes of determining the threshold for a single audit, determining the type A/B program threshold for major programs, and is not required to be audited as a major program.
FFATA Reporting
A new reporting requirement has been added to Part 3, Compliance Requirements, under the Reporting type of compliance requirement relating to FFATA reporting. The FFATA rules require direct recipients of grants or cooperative agreements who make first-tier subawards of $25,000 or more to report subaward data through the FFATA Subaward Reporting System (FSRS). Per the Supplement addendum, the auditor must test FFATA reporting for all the COVID-19 programs included in the Addendum (except for the Coronavirus Relief Fund program) where:
- The Reporting type of compliance requirement is marked as a “Y” in the Part 2 Matrix and the auditor determines Reporting to be direct and material; and
- The recipient makes first-tier subawards of $25,000 or more to report subaward data through FSRS.
The Supplement addendum indicates that auditors will need to address this reporting requirement for all selected major programs for audits of fiscal years after September 30, 2020, regardless of whether COVID-19 funding is involved. However, keep in mind that the above specifics also apply to this broadened population of major programs (that is, the auditor is auditing a direct recipient where the requirements matrix identifies Reporting with a “Y” for a major program, the auditor determines Reporting to be direct and material, and the recipient makes first-tier subawards of $25,000 or more.)
Finally, the FFATA section requires auditors to report noncompliance if encountered (e.g., the FFATA reporting was not made, incorrect amounts, lack of timeliness, etc.) and a prescribed table format is recommended for reporting noncompliance findings in the Schedule of Findings and Questioned Costs.
Other Key Items
Requirements Matrix. The Supplement addendum includes a Part 2, Matrix of Compliance Requirements. It identifies the requirements subject to audit for all new programs (noted with “new” after the title and bolded), as well as existing programs that are included in the addendum.
Agency Program Requirements. Part 4, Agency Program Requirements, includes detailed information on both new and existing programs that we have listed below by Assistance Listing number. The recent GAQC Web event mentioned above goes into more detail about certain of these new and existing programs including PRF, the Coronavirus Relief Fund, and the Education Stabilization Fund.
New COVID-19 Programs (dollar amounts included to provide perspective on program size)
16.034 - Coronavirus Emergency Supplemental Funding ($850 Million)
21.019 - Coronavirus Relief Fund ($150 Billion)
32.006 - Telehealth Program ($200 Million)
84.425 - Education Stabilization Fund ($30 Billion)
93.461 - Testing for the Uninsured ($2 Billion)
93.498 - Provider Relief Fund ($175 Billion)
Existing Programs Impacted by COVID-19
10.001 - USDA - Multiple Program COVID-19 Waivers for Food and Nutrition Service Programs
14.862 - Indian Community Development Block Grant
93.153 - Coordinated Services and Access to Research for Women, Infants, Children, and Youth
93.914 - HIV Emergency Relief Project Grants
93.917 - HIV Care Formula Grants
93.918 - Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease
Non-COVID-19 Program Addition
20.218/20.237- Federal Motor Carrier Safety Assistance cluster (note that the Department of Transportation was given permission to add this cluster even though the COVID-19 pandemic is not relevant to it).
As it relates to existing programs included in the Supplement addendum, much of the content added to the program sections includes information about agency guidance and/or waivers provided by agencies due to COVID-19. However, auditors should be aware that there are likely many other existing programs impacted by COVID-19 that are not included in the Supplement addendum. If you are auditing an existing federal program that received funding under the CARES Act that is not included in the Supplement addendum, you should refer to Appendix VII of the August 2020 Supplement for guidance. It states that auditors should perform reasonable procedures to ensure that the compliance requirements identified as subject to audit for programs included in the Supplement are current. Additionally, other programs may not have received funding under the CARES Act but still had compliance requirements that have been impacted. Appendix VII of the August 2020 Supplement also states that auditors should be alert that the program information included in the Supplement may not have been modified to reflect such requirement changes.
Student Financial Assistance (SFA). Part 5, Clusters of Programs, in the Supplement addendum includes a short section on SFA pointing auditors to the Department of Education Web site for information about requirements that have been changed or waived due to the pandemic.
Appendix VII. In addition to discussing audit extensions and the new PPE footnote, this Appendix in the Supplement addendum also discusses the status of agency guidance documents which are referred to in many of the agency program sections. It states that links to agency Web sites and guidance documents in the Addendum communicate an agency’s understanding of how relevant statutes, terms and conditions, etc., apply to a particular circumstance. However, it clarifies that such guidance documents do not create new compliance requirements. Auditors may consider guidance documents in effect during the period to understand the program requirements and may conclude whether a nonfederal entity is in compliance with a type of compliance requirement based on consideration of applicable implementing guidance in effect at the time of the activity or transaction. Importantly, the Appendix states that auditors should refer to a statute, regulation, or term and condition, as the criteria for an audit finding.
COVID-19 Relief Bill
On December 21, 2020, Congress passed a COVID-19 Relief Bill that will likely have single audit implications. Access a Journal of Accountancy article that provides a good overview of the bill. There are numerous provisions in the bill that will result in additional federal funding, much of which will be provided through existing federal programs for which single audit rules apply. There are also provisions in the bill that will make changes to certain federal programs established by the CARES Act. For example, the spend deadline for the Coronavirus Relief Fund has been extended to 12/31/21. Additionally, the bill addresses the concept of lost revenue for the Provider Relief Fund instructing, among other things, that providers may calculate such lost revenues using the Frequently Asked Questions guidance released by HHS in June 2020. As we have reported previously, HHS has revised the lost revenue definition several times since June so there are clearly questions about how this change will be implemented. Further, these types of changes to CARES programs are not contemplated in the 2020 Supplement addendum just released. We have already been in touch with OMB to ask about next steps for determining the impact of these types of provisions and how they will be addressed in the Supplement. We will report back early in the new year what we learn from these inquiries. In the meantime, we will continue reviewing the bill to identify provisions having single audit implications.
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Sincerely,
AICPA Governmental Audit Quality Center
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