| Dear Center Members: |
This GAQC Alert informs you about the following important matters:
- Member registration information for the next live GAQC Web event to be held on January 20, 2022, on audit considerations relating to for-profit entities subject to the U.S. Department of Health and Human Services (HHS) audit requirements for the Provider Relief Fund (PRF) program and other HHS awards;
- Details on the recently released Addendum #1 to the 2021 Office of Management and Budget (OMB) Compliance Supplement (Supplement);
- What we know about Addendum #2 to the 2021 Supplement; and
- The process and timing for the 2022 Supplement and an opportunity to comment on changes proposed to certain programs.
|
|
For-Profit PRF Event
The COVID-19 pandemic has resulted in an influx of HHS funding to for-profit hospitals and other for-profit healthcare providers, and many of these entities are subject to HHS audit requirements which include options for either a single audit (or program-specific audit) or a financial audit under Government Auditing Standards. For many for-profit entities, the December 31, 2021, year-end will be the first time the HHS audit requirement becomes effective. The GAQC has been diligently working over the last year to nail down the specifics of these for-profit engagements. The result of this work will be presented in the next live GAQC Web event titled, Updated Audit Primer: Auditing For-Profit Entities Receiving Provider Relief Funds, to be held on Thursday, January 20, 2021, from 1:00 PM – 3:00 PM (Eastern Time). Please share this information with colleagues in your audit practice that focus on auditing for-profit healthcare organizations.
This Web event will walk participants through the following:
- The types of for-profit entities subject to the HHS audit requirements and what the HHS requirements entail;
- A deeper dive into the financial audit option including an illustrative schedule and related notes that clients could prepare, as well as the appropriate auditor reporting;
- Other audit performance considerations; and
- Best practices, tips; and resources.
Important Note: This session is focused on for-profit entities subject to the HHS audit requirements and not governmental and not-for-profit entity considerations. Additionally, the event will not focus on related for-profit entity financial statement accounting considerations.
GAQC Member Registration with CPE (fee). Access the version of this GAQC Alert that was sent directly to members.
GAQC Member Registration with no-CPE (free). Access the version of this GAQC Alert that was sent directly to members.
If you have clients that would benefit from attending, you can share the public registration link with them as follows:
Public registration with CPE (fee) Access the CPE registration page.
Note that a no-CPE archive of the event will be posted on the GAQC Web site shortly after the live event and left open to the public for those clients that wish to listen to the event but do not want CPE.
2021 Supplement Addendum #1
OMB issued a Federal Register notice announcing the issuance of Addendum #1 to the 2021 Supplement on December 3, 2021. The Addendum includes two programs as follows: (1) The Coronavirus State and Local Fiscal Recovery Fund (CSLFRF), and (2) An update to the Education Stabilization Fund (ESF). The following summarizes key information about Addendum #1:
Access information: The Addendum can be found on cfo.gov at: https://www.cfo.gov/2021-addendum-1/. It is important to note that the Addendum is NOT posted on the OMB Web site where the original 2021 Supplement is posted. Be sure to inform staff of this posting nuance so that they do not overlook the Addendum’s issuance. Note also that the GAQC has posted the 2 programs above to the GAQC 2021 OMB Compliance Supplement Resource Center, along with our "GAQC Observations" on the two new program sections.
CSLFRF. The new program section for CSLFRF (Assistance Listing 21.027), lays out the expectations of the U.S. Department of Treasury for auditing this massive new program that will likely be a major program for many recipients. Although state and local governments will often be direct recipients of this funding, not-for-profit organizations may receive this funding from a governmental entity. In addition to providing program details and identifying the compliance requirements subject to audit, the section clarifies that the "beneficiary" concept introduced in the Coronavirus Relief Fund (CRF) also applies to CSLFRF. It also explains that Treasury has proposed program requirements in an Interim Final Rule and that auditors should test compliance with the requirements that existed at the time of the expenditure. As an aside, we are still unsure when a Final Rule from Treasury on this program will be issued. Importantly, the section also discusses several facts about revenue loss which is a key component of this program as follows:
- Revenue loss is not an eligible use; instead, recipients calculate it based on a formula to determine the limit for the amount of CSLFRF funds that can be used for the "provision of government services" (which is one of four eligible uses of CSLFRF funds);
- Revenue replacement calculations for expenditures covered under Treasury’s Interim Final Rule are not subject to audit in the single audit of this program for FY 2021;
- For SEFA reporting purposes, the aggregate expenditures for all four eligible use categories are reported on the SEFA and not the result of the revenue loss calculation.
ESF Update. The Supplement section for ESF is broken down into 2 sections: Section 1 (Elementary and Secondary Education) and Section 2 (Higher Education). Only Section 1 was updated in Addendum #1 to address American Rescue Plan Act (ARP) funding implications in subprograms 84.425U and 84.425X. Importantly, note that Section 2 of ESF is not included in Addendum #1 since it was already updated for ARP implications in the original release of the 2021 Supplement. Thus, auditors having clients with significant funding under subprograms 84.425U or 84.425X and also funding under Section 2 subprograms will use the Section 1 in Addendum #1 and the Section 2 in the original release. If Section 1 applies to your client but they did not have funding under subprograms 84.425U or 84.425X, you can just use the original release of the ESF program to perform the audit. Finally, the update to ESF in Addendum #1 notes that auditors should document whether they use the 2021 Supplement or Addendum #1 for the audit.
Timing of Addendum #1 Issuance. Note that the cfo.gov Web page states that "For audits with report dates prior to the issuance of this guidance, auditors are not required to go back retroactively to review these two programs based on the newly issued guidance." So, for example, if you audited CSLFRF as a major program in advance of the Addendum’s issuance (using Part 7 of the Supplement), you would not have to go back and refer to the Addendum as long as you issued your audit report with a report date prior to December 3, 2021.
Plans for Addendum #2
OMB staff stated in a recent public meeting that they do not expect Addendum #2 to be issued until January 2022. The Federal Register notice issued for Addendum #1 confirmed the programs to be included in Addendum #2 and they are the same as those we informed you about in GAQC Alert #433. As to whether auditors should wait for Addendum #2, the GAQC recommends waiting (if possible) if you are auditing one of the new programs to be included. The decision on whether to proceed on auditing existing programs in Addendum #2 will be based on facts and circumstances. For example, if you are auditing an existing program that will be in Addendum #2 and that program has significant ARP funding that will be subject to the audit, you may want to wait since the updates coming in Addendum #2 primarily relate to ARP funding implications. However, if ARP funding did not significantly impact your client for one of the existing programs in Addendum #2, proceeding with auditing the program using the original Supplement release may be appropriate.
2022 Supplement Process
OMB and the federal agencies have issued a formal schedule that establishes a goal of April 30, 2022, as the release date of the 2022 Supplement. While it remains to be seen whether that date will be achieved, there is a strong push to achieve that goal. The GAQC has already begun reviewing draft programs to be included. Four new programs are expected, as well as approximately 35 programs with major changes from Agriculture, Commerce, Housing and Urban Development, Federal Communications Commission, Energy, Education, Labor, HHS, and Corporation for National and Community Service. OMB is offering the public an opportunity to review and comment on the draft 2022 program sections. If you are interested, contact OMB at GrantsTeam@omb.eop.gov with the subject line "2022 Compliance Supplement Request" and indicate the agency and programs that you would like to review. Comments will be due by January 18, 2022.
* * * * *
Sincerely,
AICPA Governmental Audit Quality Center
|
|
 |
|
| In This Alert |
|
| SEFA Challenges? |
|
| Additional Resources |
|
| Stay Informed |
We welcome any suggestions or questions - please send them by e-mail at GAQC@aicpa.org.
Members of the Governmental Audit Quality Center (GAQC) may only reproduce and distribute GAQC Alerts internally within the firm or state audit organization (SAO) to other Center member firm/SAO personnel as part of the organizations' professional services. For information about permission to copy any part of these documents for redistribution or inclusion in other work, please click on the copyright notice below or phone the copyright permission hotline (919) 402-4031.
©2021 Association of International Certified Professional Accountants.
Online privacy policies and copyright information. |
|
|
|
