Dear Center Members: |
This GAQC Alert informs you about the following important matters:
- A new guide issued by the U.S. Department of Education (ED) containing requirements and guidance for compliance attestation engagements of proprietary schools expending Higher Education Emergency Relief Fund (HEERF) grants;
- A recent report issued by the Government Accountability Office (GAO) related to COVID-19 funding that addresses single audits and federal agency shortfalls;
- An update made by GAO to Government Auditing Standards (also referred to as the Yellow Book);
- Updated frequently asked questions (FAQs) for the Provider Relief Fund (PRF) released by the U.S. Department of Health and Human Services (HHS) and updated FAQs issued by the U.S. Department of the Treasury (Treasury) for the Emergency Rental Assistance (ERA) Program;
- Pre-award guidance issued by Treasury on the State and Local Government (SLG) Fiscal Recovery Fund;
- A reminder about an audit submission extension issued by the U.S. Department of Housing and Urban Development (HUD);
- A slight update made to the GAQC practice aid on the timing of reporting COVID-19 funding on the schedule of expenditures of federal awards (SEFA);
- The issuance of AICPA comment letters to the Governmental Accounting Standards Board (GASB) on its financial report model, elements, and revenue and expense proposals; and
- A recent proposal issued by GASB to change the name of the "comprehensive annual financial report" and the importance of this project.
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HEERF Guide for Proprietary Schools
There have been many questions about what the audit requirements would be for proprietary schools that were provided HEERF funding. ED has answered those questions through the March 31, 2021, issuance of a new guide titled, Guide for Compliance Attestation Engagements of Proprietary Schools Expending Higher Education Emergency Relief Fund (HEERF) Grants (the Guide). It generally applies to proprietary schools expending HEERF grants through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (known as HEERF I), the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (CRRSAA) (known as HEERF II), or the American Rescue Plan Act of 2021 (ARPA) (known as HEERF III) in amounts of $500,000 or more during a school's fiscal year. For schools on Federal Student Aid's (FSA's) Heightened Cash Monitoring 1 or 2 lists, the audit is required for fiscal years in which the school expends any HEERF grant funds. Even though the Guide uses the terms "audit" and "attestation" interchangeably throughout, the engagement being required is an attestation engagement.
The compliance attestation engagements are due within the later of 120 days after the issuance of the Guide or the submission deadline for the school's Title IV audit, including any extensions granted by ED for those audits. Upon completion of the engagement, proprietary schools must submit the HEERF audit package through FSA's eZ-Audit System. Proprietary schools must include the HEERF audit package as part of their annual Title IV audit submission in eZ-Audit if the annual Title IV audit and HEERF audit have the same due date. Recipients were made aware of the requirement for an audit in a communication from ED dated March 8, 2021.
GAO Reports Issued
GAO recently issued two reports related to COVID-19. The first report, COVID-19: Sustained Federal Action Is Crucial as Pandemic Enters It's Second Year, provides a progress report on the federal agencies' handling of the pandemic and related funding and the risks that GAO is seeing. Of particular interest to GAQC members is a section of the report discussing the challenges faced by auditors in obtaining timely and useful guidance for performing single audits and improvements needed in the development of agency guidance, with an emphasis on problems with the Office of Management and Budget (OMB) Compliance Supplement. See pages 4, 33, and the enclosure beginning at page 438 for single audit related discussions. The GAO observations are all matters that the GAQC has been raising and advocating on since even before the pandemic started. A recent Journal of Accountancy article, GAO: Guidance for Single Audits Should be More Timely, Responsive, does a nice job of summarizing the report's single audit discussion and includes GAQC observations on the report.
The second GAO report is titled, OMB Should Collect and Share Lessons Learned from Use of COVID-19-Related Grant Flexibilities and can be accessed at https://www.gao.gov/assets/gao-21-318.pdf. This report is not as relevant to single audits but does discuss single audit extensions provided by OMB early on to accommodate remote work, among other flexibilities.
Updated Yellow Book
GAO just issued an April 2021 technical update to the 2018 Revision of Government Auditing Standards and a discussion paper, GAGAS Performance Audits: Discussion of Concepts to Consider When Auditing Public Functions and Services. Electronic copies of both documents are available at https://www.gao.gov/yellowbook. The printed version of the updated Yellow Book will be available for purchase later through the Government Publishing Office.
The changes made to the Yellow Book, which are effective upon issuance, are relatively minor as follows:
- Changes are made to paragraphs 1.02, 1.03, and 1.23 to emphasize: (1) management and officials entrusted with public resources are responsible for carrying out public functions and providing service to the public equitably; (2) legislators, oversight bodies, those charged with governance, and the public need to know whether government services are provided equitably; and (3) examples of program effectiveness and results audit objectives include determining whether a program provides equitable access to or distribution of public resources within the context of statutory parameters.
- In discussing the performance of nonaudit services and the auditor’s evaluation of the effect of nonaudit services on independence in paragraph 3.83, the revision states that auditors should determine whether the skill, knowledge, or experience of the individual responsible for overseeing the nonaudit service was sufficient. The previous edition of the Yellow Book referred to "skills, knowledge, and experience."
- Revisions are made in chapters 8 and 9 of the standards that discuss the consideration of internal control in a performance audit.
Updated PRF and ERA FAQs
HHS updated the PRF FAQs on March 31, 2021. Access the updated FAQs and search for 3/31/2021 to locate the new or modified questions. In the meantime, there have been no new developments from HHS on single audits of PRF funds for December 31, 2020, and later year-ends. The status we provided you in GAQC Alert #423 continues to be the latest news we have. We are continually advocating that HHS address these important open issues using as many different avenues as we can.
Additionally, Treasury also updated its FAQs for the ERA Program twice in March, with the most recent update being made on March 26, 2021. Access the updated FAQs. Footnote 1 describes the various changes made to the FAQs. Treasury also updated the grantee award terms for the ERA program on March 26, 2021. We have also been strongly advocating that Treasury prepare a 2021 Compliance Supplement section for this new program as we believe it will be a major program for many entities. To date, we have not received a draft to review.
State and Local Fiscal Recovery Fund
One of the largest new programs established by ARPA is the State and Local Fiscal Recovery Fund which will provide $350 billion to States (defined to include the District of Columbia), territories, tribal governments, counties, and metropolitan cities. While Treasury has not yet indicated whether this funding will be subject to single audit rules, it has just issued pre-award guidance on April 15, 2021, advising entities to ensure they have a Data Universal Numbering System (DUNS) number and an active registration with the System for Award Management (SAM) database at SAM.gov. If not, entities should take the appropriate steps as soon as possible. Additionally, the guidance advises entities to gather the entity's payment information. Finally, it informs that program guidance will be released in the coming weeks and advises entities to continue to check the Treasury Web site for this program for further updates. Auditors with clients that will be receiving this funding may wish to pass this information along to them.
HUD Issues Extension
We wanted to ensure that you did not miss an emergency e-mail we sent out on March 31, 2021. The e-mail discussed a submission waiver issued by HUD titled, Waiver of Submission Deadline for Certain Financial Reports for Owners of Multifamily Projects and Residential Care Facilities, for owners of multifamily projects and residential care facilities that are required to submit an annual, audited financial statement through HUD's Financial Assessment system (FASS) between October 1, 2020 and June 30, 2021. The waiver extends the submission requirement through FASS until June 30, 2021, with certain limitations. HUD cites the purpose of the waiver is to provide additional time for the applicable entities to submit the required financial information to HUD given the impact the COVID-19 pandemic. Read the waiver for more detail.
GAQC SEFA Practice Aid Revision
As noted in GAQC Alert #423, the GAQC issued a practice aid in February 2021 titled, GAQC Nonauthoritative Guidance on the Reporting of Certain COVID-19 Awards on an Accrual Basis SEFA. We have recently made slight updates to the document in response to questions about how certain new funding mechanisms would be considered in light of our guidance on when an award exists for SEFA reporting purposes. The main question received is how SEFA presentation would be handled when an existing award is subsequently impacted by a substantial amendment to award terms due to new legislation. A real-life example of this situation is the retroactive expansion of the allowable uses of unspent HEERF 1 grant funds by the subsequent allocation of HEERF 2 funding resulting from CRRSAA. To address this situation, we added to assumption 3 in the document to explain this scenario and provide our nonauthoritative position that a substantial amendment like this would be the equivalent of a new award for purposes of determining when associated activity is presented on the SEFA. Several other minor clarifying edits were made to mention subsequent legislation to the CARES Act and to modify several of our illustrations to be clear we are referring to HEERF 1 (which is a necessary clarification now that HEERF 2 and HEERF 3 exist). All changes in the document are noted by underlined text.
GASB Comment Letters
In June 2020, the GASB issued two Exposure Drafts (ED), Financial Reporting Model Improvements (FRM ED) and Recognition of Elements of Financial Statements (Elements ED), and a Preliminary Views, Revenue and Expense Recognition (RER PV). The AICPA State and Local Government Expert Panel (SLGEP) recently expressed their views on these documents in two separate comment letters—one combined comment letter on the FRM and Elements EDs and another comment letter on the RER PV. Thanks to our SLGEP members for spending a lot of time on these proposals and for offering GASB valuable feedback.The SLGEP spoke at a GASB public hearing today on these projects. Access an archive of the public hearing once it is available on the GASB Web site to view the AICPA testimony.
GASB Change to Report Name
GASB has issued an exposure draft, The Annual Comprehensive Financial Report, which proposes a new name for the "comprehensive annual financial report" which would be revised to be referred to as the "annual comprehensive financial report." This proposed Statement was developed in response to concerns raised by stakeholders that the common pronunciation of the acronym for comprehensive annual financial report sounds like a profoundly objectionable racial slur in South Africa. Watch a short video discussing more about this project and the reasons for it. Comments are due to GASB by July 9, 2021. Access the exposure draft.
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Sincerely,
AICPA Governmental Audit Quality Center
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In This Alert |
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