| Dear Center Members: |
This GAQC Alert informs you about the following important matters:
- A Federal Register (FR) technical update notice issued by Office of Management and Budget (OMB) announcing a compliance examination attestation engagement option for certain recipients of funding from the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF), as well as a reminder from the GAQC to register for an April 21, 2022, GAQC Web event on the CSLFRF program
- An announcement by OMB in the same FR technical update notice above that removes a Special Test and Provision from the Provider Relief Fund (PRF) program section in the 2021 OMB Compliance Supplement
- The latest news and developments related to the Shuttered Venue Operators Grant (SVOG) program; and
- The issuance of a new document titled, Independence Rules Comparison: AICPA and Government Auditing Standards, issued by the AICPA Professional Ethics team.
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CSLFRF Alternative Engagement
The $350 billion U.S. Treasury CSLFRF program (Assistance Listing 21.027) is historic in terms of its size and the total number of recipients receiving the funding which is estimated at well over 30,000. Many of the recipients, which are comprised primarily of state, local, and tribal governments, are small entities that have not previously been required to undergo a single audit. Discussions with Treasury and OMB have been ongoing for months about how to reduce the audit burden on these small entities, as well as address concerns about the capacity of qualified auditors available to perform the audits. A collaborative effort was undertaken between Treasury, OMB, the GAQC, and the National Association of State Auditors, Comptrollers, and Treasurers to develop an alternative to a full single audit or program-specific audit under the Uniform Guidance for certain recipients that would be less burdensome, but still uphold Treasury's responsibility to be good stewards of federal funds. The result of this work is the issuance of today's FR notice and the related issuance of an update to the 2021 OMB Compliance Supplement Part 4 section for the CSLFRF program. Access the updated CSLFRF program section (see the Other Information section at the end of the program section for the related guidance).
The alternative engagement is a compliance examination engagement which is to be performed in accordance with the AICPA Statements on Standards for Attestation Engagements (i.e., AT-C section 315, Compliance Attestation) and Government Auditing Standards. The engagement will focus on two narrowly scoped compliance requirements related to Activities Allowed and Unallowed and Allowable Cost/Cost Principles. It is important to note that this alternative is only available to certain eligible recipients as follows:
CSLFRF recipients that expend $750,000 or more during the recipient’s fiscal year in federal awards, and who meet both criteria listed below have the option to follow the alternative CSLFRF compliance examination engagement:
- The recipient’s total CSLFRF award received directly from Treasury or received (through states) as a non-entitlement unit of local government is at or below $10 million; and
- Other Federal award funds the recipient expended (not including their CSLFRF award funds) are less than $750,000 during the recipient’s fiscal year.
The GAQC is currently beginning the development of additional guidance for practitioners performing these engagements. Specifically, the guidance will be in the form of a GAQC Practice Aid that will assist practitioners in understanding the AICPA attestation standards and what they require, as well as highlight important performance considerations and illustrative reporting.
Finally, as noted in GAQC Alert #438, the GAQC will hold a Web event titled, Auditor Considerations: The Coronavirus State and Local Fiscal Recovery Funds Program, on April 21, 2022, from 1:00 PM – 3:00 PM (Eastern Time). It will cover auditing this program in a single audit, as well as considerations when performing the alternative compliance examination engagement. Member registration information can be found in GAQC Alert #438. Due to its importance, we have also opened this event to the public. If you have clients that may be interested in learning more about what auditors will be focusing on in audits of this program, they can register using the public link.
PRF Special Test Removal
The above-described FR notice also removes the only Special Test and Provision that was subject to audit for the PRF program (Assistance Listing 93.498) in the 2021 OMB Compliance Supplement. The requirement that has been removed relates to Out-of-Network Patient Out-of-Pocket Expenses. The reason cited in the FR notice for the removal of the requirement and related audit objectives and procedures was that HHS determined that the review requirements related to this requirement are no longer meaningful and applicable to the oversight of this program. The GAQC has been communicating with HHS for some time about concerns with this requirement based on member feedback regarding the challenges with entity compliance and related auditor testing. Access the revised Part 4 section for the PRF program.
SVOG Update
In February, the U.S. Small Business Administration (SBA) issued updated Post-Application Guidance for SVOG applicants, as well as Post-Award Frequently Asked Questions (FAQs) Among other things, the updated Post-Application Guidance states that a for-profit entity may have either a financial statement audit or a single audit or program-specific audit to meet the SBA audit requirements. It also clarifies that the due date for submission of the audit reporting package is 9 months from the end of an entity's fiscal year. Additionally, the SBA issued a new set of Post-Award FAQs which contain answers to many common compliance-related questions for SVOG.
We are continuing to work with the SVOG team on the audit requirements for the SVOG program. SBA is in process of developing a 2022 OMB Compliance Supplement section for this program and we are involved in discussions on nuances of this program for for-profit recipients. Stay tuned as we believe there will be more to communicate on the auditing this program in the future, particularly as it relates to for-profit entities. Watch for future GAQC Alerts with additional updates.
Independence Rules Comparison
With the increase in federal funding due to the pandemic, there are many more entities that are now subject to audit requirements that require the engagement to be performed in accordance with Government Auditing Standards (also referred to as the Yellow Book).
The AICPA Code of Professional Conduct (AICPA code) and the Yellow Book independence requirements each stand on their own. Therefore, when an audit engagement such as a single audit is subject to the Yellow Book, the auditor must comply with the independence requirements in the Yellow Book, as well as the AICPA code.
To assist auditors in complying with both sets of independence requirements, the AICPA Professional Ethics team issued an independence rules comparison tool in February 2022. The Independence Rules Comparison: AICPA and Government Auditing Standards. It provides a high-level overview of the various independence requirements, detailed comparisons of the conceptual framework approach and nonattest/nonaudit services topics, and comparison tables with references to the independence interpretations in the AICPA code and the specific paragraph references to the requirements in the Yellow Book. Auditors are reminded that it is still necessary to consult the specific requirements when evaluating independence.* * * * *
Sincerely,
AICPA Governmental Audit Quality Center |
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