| Dear Center Members: |
This GAQC Alert includes important information on the following items:
- A reminder for next week’s GAQC Web event on getting ready to audit leases now that Governmental Accounting Standards Board (GASB) Statement No. 87, Leases, is soon-to-be effective.
- The GAQC’s required annual Webcast will be held on May 3, 2022; hold the date!
- The issuance of Addendum #2 to the 2021 Office of Management and Budget (OMB) Compliance Supplement (Supplement).
- A final rule has been issued for the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) and other news on this program, including the potential for a simpler audit approach for certain recipients.
- The availability of updated "final draft" audit reports for auditors performing audits of for-profit entities under the Department of Housing and Urban Development (HUD) Consolidated Audit Guide (HUD Guide).
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Register for Event on GASB Leases
A reminder that the next live GAQC Web event, "Accounting and Auditing Considerations GASB's Lease Standard: Are You Ready?" will be held next Tuesday, February 1, 2022, from 1:00 PM to 3:00 PM (Eastern Time). The presenters for this event are Jeff Markert, KPMG, and Chris Pembrook, Crawford & Associates, P.C. Are you ready to audit clients implementing GASB 87? If not, this event is just what you need because GASB 87 is effective for the first time for your upcoming June 30, 2022, fiscal year end audits.
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.
Public Registration with CPE (fee) (to share with your clients).
Annual GAQC Webcast
The GAQC annual required Webcast, 2022 GAQC Annual Update Webcast, will be held on Tuesday, May 3, 2022, from 1:00 PM – 3:00 PM (Eastern Time). Mark your calendars and watch for a future registration alert. This event, required for firm designated audit quality partners and state audit organization designated single audit leaders, will provide members with a summary of the key issues that should be considered by audit teams as part of planning for the 2022 audit season.
Addendum #2 Issued
OMB issued a Federal Register notice announcing the issuance of Addendum #2 to the 2021 Supplement on January 19, 2022. It states that Addendum's guidance is applicable only for audits with report dates subsequent to issuance of the guidance (i.e., reports dated after January 19, 2022). Like Addendum #1, this Addendum can be found on cfo.gov at: https://www.cfo.gov/2021-addendum-1and2/. Note that the GAQC has also posted the individual programs in the Addendum to the GAQC 2021 OMB Compliance Supplement Resource Center, along with our "GAQC Observations" on the new program sections. The following provides high-level detail on the 7 programs included in Addendum #2 and identifies the Assistance Listing number for each program.
10.542 – Pandemic Electronic Benefits Transfer (EBT) Food Benefits. This is a new program that provides school age children with nutrition assistance. It is provided to state governments.
10.649 – Pandemic EBT – Administrative Costs Grants. This is a new program that is provided primarily to defray administrative cost of executing the pandemic EBT initiative. It is provided to state governments.
14.871 – Section 8 Housing Choice Vouchers. This is an existing program with changes made primarily to address new American Rescue Plan (ARP) Act funding provisions.
20.315 – National Railroad Passenger Corporation Grants. This is a new program that has only one recipient (i.e., Amtrak).
93.499 – Low Income Household Water Assistance Program. This is a new program that targets assistance to those households with the lowest incomes that pay a high proportion of household income for water and wastewater services.
93.558 – Temporary Assistance for Needy Families. This is an existing program with changes made primarily to address ARP Act funding provisions.
93.575 – Child Care and Development Block Grant. This existing program is part of the Child Care and Development Fund cluster. In addition to changes to address ARP Act funding provisions, auditors should note that Addendum #2 makes the reporting type of compliance requirement subject to audit (which includes testing of a financial report and special reporting requirements associated with the Federal Funding Accountability and Transparency Act). The U.S. Department of Health and Human Services received approval from OMB to add this requirement and to exceed the 6-requirement mandate.
CSLFRF News
The U.S. Department of Treasury issued the long-awaited final rule for CSLFRF. Treasury has also posted an overview of the final rule that will be useful for auditors and recipients to understand the changes made. Among the biggest change, the final rule offers a standard allowance for revenue loss of up to $10 million, allowing recipients to select between a standard amount of revenue loss or complete a full revenue loss calculation. Recipients that select the standard allowance may use that amount – in many cases their full award – for government services, with streamlined reporting requirements. Treasury's CSLFRF Web page states that the final rule takes effect on April 1, 2022, though states that recipients can choose to take advantage of its flexibilities and simplifications now. It goes on to advise recipients to consult the "Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule" for more information on compliance with the interim final rule and the final rule.
Importantly, auditors should also be aware that the GAQC team has been consulting with OMB and Treasury on exploring options for a more simplistic audit approach for certain of the numerous smaller recipients of this funding, primarily due to concerns around the availability of qualified auditors to perform the audits. These discussions are currently active. Treasury and OMB have issued a joint statement on this activity, an excerpt of which appears below. Auditors with clients receiving this funding should stay tuned as this matter develops and watch for future GAQC Alerts with follow-up updates.
"…As this is the first fiscal relief program to grant funds directly to tens of thousands of non-entitlement units of local government (NEUs), Treasury and OMB are working together closely to find ways to streamline the administration and oversight of the program across the board, while maintaining high standards of transparency and accountability.
We very much value the input we have received from the American Institute of CPAs and the National Association of State Auditors, Comptrollers and Treasurers with respect to the capacity of the U.S. audit community to perform full single audits on more than 30,000 recipients of SLFRF monies. Treasury and OMB intend to work closely together in the coming weeks to issue further guidance, in consultation with stakeholders, clarifying and streamlining the audit process in alignment with the final rule.
Most notably for smaller recipients, the final rule has introduced a “standard allowance” for revenue loss, allowing all recipients to spend up to $10 million of their allocation on “government services” in lieu of using the more complex revenue loss formula. We anticipate that this change will allow us to specify a simpler, more practical approach to compliance and oversight, including the Single Audit process…"
Final Draft HUD Reports Posted
The GAQC has worked collaboratively with HUD Office of Inspector General staff to update the illustrative auditor reports included in Chapter 2 of the HUD Guide for the impact of Statement on Auditing Standards Nos. 134 - 140. Those standards are effective for audits of periods ending on or after December 15, 2021. Currently, the reports, along with other revisions to Chapter 2, are in the HUD clearance process. The GAQC has obtained permission from HUD to post the final drafts of the illustrative reports on the GAQC Illustrative Reports Web page (scroll down to the HUD Report Illustrations section). This page is open to GAQC and AICPA members, as well as the public (only an AICPA account is needed to access them). These GAQC posted reports are intended to assist auditors that need to issue reports prior to HUD’s formal issuance. Once HUD issues the final reports (and an updated Chapter 2), auditors should look to the HUD Guide to access the final illustrations.
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Sincerely,
AICPA Governmental Audit Quality Center
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