New Guidelines on Single Audits

New guidance on single audits was issued Tuesday by the Office of Management and Budget (OMB) in the form of an addendum to the 2020 OMB Compliance Supplement.

Due to the late issuance of audit guidance for the COVID-19 programs contained in the addendum, OMB is providing a three-month audit submission extension for single audits of 2020 year ends through September 30, 2020, year ends only if the recipient received some form of COVID-19 funding.

For example, a single audit of a client with a June 30, 2020, year end that received COVID-19 funding is now due June 30, 2021, instead of March 31, 2021. There is no requirement for individual recipients or subrecipients to seek approval for the extension, but the addendum advises that recipients and subrecipients should maintain documentation of the reason for the delayed filing.

Other extensions previously granted by OMB for 2019 fiscal-year-end single audits affected by the coronavirus pandemic expire on Dec. 31, 2020. The addendum answered other questions related to new COVID-19 funding, including those established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136.

In an alert issued by the AICPA Governmental Audit Quality Center (GAQC) and posted on the GAQC website, the GAQC explains the following key addendum provisions:

  • Provider Relief Fund expenditures and lost revenue will not be included on the Schedule of Expenditures and Federal Awards (SEFA) until December 31, 2020, year ends and later. This timing only affects the Provider Relief Fund program and does not apply to other COVID-19 funding that health care entities may have received.
  • Nonfederal entities that received donated personal protective equipment (PPE) should include the fair market value of the PPE at the time of receipt in a stand-alone footnote to the SEFA that can be marked “unaudited.” The auditor should not count the donated PPE for purposes of determining the threshold for a single audit or determining the Type A/B program threshold for major programs. Donated PPE is not required to be audited as a major program.
  • The auditor is required to test Federal Funding Accountability and Transparency Act (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 the FFATA Subaward Reporting System.
  • Auditors will need to address the FFATA reporting requirement for all selected major programs for audits of fiscal years after September 30, 2020, regardless of whether COVID-19 funding is involved. Auditors are required to report any noncompliance with FFATA reporting rules (such as if FFATA reporting was not made, incorrect amounts were reported, etc.). The guidance recommends a prescribed table format for reporting noncompliance findings in the Schedule of Findings and Questioned Costs.
  • A matrix of compliance requirements in the addendum identifies the requirements subject to audit for all new programs, as well as existing programs that are included in the addendum.
  • Detailed information on new and existing programs is included in agency program requirement sections in the addendum. But there are other existing programs affected by COVID-19 that are not included in the addendum. For practitioners auditing an existing federal program that received funding under the CARES Act that is not included in the supplement addendum, the GAQC advises referring to Appendix VII of the August 2020 Supplement for guidance.
  • Auditors can visit the Department of Education website for information on student financial assistance requirements that have been changed or waived because of the pandemic.

For more information on single audits, visit the GAQC’s webpage, as well as the GAQC’s Single Audit Resources webpage.