This article was originally published on May 22, 2020. Updates are as follows:
- June 24, 2020, to include new coronavirus-related programs that will be subject to a single audit
- July 2, 2020, to reflect information released in memorandum M-20-26
- January 21, 2021, to reflect guidance in the 2020 Compliance Supplement Addendum
- March 29, 2021, to reflect information released in memorandum M-20-21
- The OMB recently indicated that funds received under the PPP will not be subject to the Uniform Guidance single audit requirements.
- However, loans received through the EIDL program are subject to the single audit requirements.
- A recent OMB memo notes that an organization can provide its single audit submission up to six months beyond the normal due date.
- The AICPA Governmental Audit Quality Center is still seeking additional clarity from the OMB.
Congress recently passed four significant pieces of legislation to provide relief funds to various organizations in response to COVID-19:
- The Paycheck Protection Program and Health Care Enhancement Act (PPP and HCE Act)
- The Coronavirus Aid, Relief, and Economic Security (CARES) Act
- The Families First Coronavirus Response Act (FFCRA)
- The Coronavirus Preparedness and Response Supplemental Appropriations Act
Need help navigating compliance issues posed by the receipt of stimulus funds?
While the funds are providing much-needed economic relief, nonprofit organizations have been wondering whether the funds are subject to single audit requirements. Fortunately, we’ve received more clarity.
The Office of Management and Budget (OMB) recently indicated that funds received under the Paycheck Protection Program (PPP) will not be subject to the Uniform Guidance single audit requirements; however, loans received by nonprofit organizations under the Small Business Administration (SBA) Economic Injury Disaster Loan (EIDL) program are considered federal financial assistance and, therefore, are subject to the single audit requirements.
As of June 16, 2020, the following programs that were established as a result of the COVID-19 pandemic have been identified as being subject to a single audit:
- 93.498 (Health and Human Services (HHS)) — Provider Relief Fund
- 21.019 (Treasury) — Coronavirus Relief Fund (CRF)
- 84.425 (Education) — Education Stabilization Fund
- 16.034 (Justice) — Coronavirus Emergency Supplemental Funding Program
- 59.008 (SBA) — Disaster Assistance Loans (Economic Injury Disaster Loans)
- 93.461 (HHS) — Uninsured COVID Testing and Treatment
- 93.527 (HHS) — Grants for New and Expanded Services under the Health Center Program
- 93.665 (HHS) — Emergency Grants to Address Mental and Substance Use Disorders During COVID-19
- 93.697 (HHS) — Rural Health Clinic Testing
Today we’ll focus on what we do know and tackle a few questions related to stimulus relief funds and single audits.
What is a single audit?
If you are new to receiving federal funds, the single audit term may be unfamiliar. A single audit is required when a state or local government, Indian tribe, institution of higher education (IHE), or nonprofit organization is the recipient or subrecipient of a federal award and expends $750,000 or more of federal awards during their fiscal year. The $750,000 threshold includes assistance received in the form of loans.
The focus in a single audit is determining whether the recipient complied with the applicable federal statutes and regulations and the terms and conditions of the federal awards. Additionally, the recipient must show that it has established and implemented proper internal controls pertaining to those compliance requirements.
Although for-profit entities that receive federal funds are subject to compliance requirements included in the award agreements, they may not be subject to the single audit requirement if the federal awarding agency does not impose the single audit requirement.
If I received EIDL funds, do I need a single audit?
Maybe. EIDL funds may have been funded in two pieces:
- An advance of up to $10,000, which does not need to be repaid
- A loan based on the SBA’s sizing process
However, there still may be confusion surrounding the process. While eligible applicants submit some preliminary information through the SBA’s website, there is a sizable backlog, and the SBA is processing on a first-come, first-served basis. Organizations may find the advance (up to $10,000) suddenly appears as a deposit in their bank account one day. At a later point, the SBA may contact the organization to work through the loan details, including sizing. Then, the loan agreements are signed and funded.
As of late April, there were a limited number of EIDL loans processed. The SBA released the following national statistics:
- 39,000 loans were approved
- Average loan size was approximately $200,000
This compares to the PPP, which funded almost 4 million loans by May 1.
Of the 39,000 loans approved, we are unsure how many exceed the $750,000 federal award threshold. If your organization received other federal awards, they should be added to the EIDL funding when determining if a single audit is required.
Is there a single audit filing extension?
On March 10, 2020, the OMB released memorandum M-20-17, Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations. This memo provides administrative relief to grant recipients affected by the loss of operational capacity and increased costs due to COVID-19. Under M-20-17, an organization can provide its single audit submission up to six months beyond the normal due date.
Additionally, on June 18, 2020, OMB released memorandum M-20-26, Extension of Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations. This memo outlines the following:
- States that the previous six-month submission extension is still valid for single audits not yet submitted at March 19, 2020, with normal due dates from March 30, 2020, through June 30, 2020 (i.e., June 30, 2019, year-ends through September 30, 2019, year-ends).
- Reduces the blanket extension for audits with normal due dates from July 31, 2020, through September 30, 2020 (i.e., October 31, 2019, year-ends through December 31, 2019, year-ends) to three months.
- Rescinds the six-month single audit submission extension for due dates after September 30, 2020 (i.e., year-ends after December 31, 2019).
You would not need to seek approval for a single audit extension by the cognizant or oversight agency; however, you should maintain proper documentation to support the reason for the delayed filing.
Subsequently, on December 20, 2020 OMB released the 2020 Compliance Supplement Addendum, which includes a 3-month audit submission extension for single audits of 2020 year-ends through September 30, 2020 year-ends only if the recipient received COVID-19 funding. So, for example, single audits of June 30, 2020, where the recipient received COVID-19 funding would now be due June 30, 2021 (instead of March 31, 2021). There is no requirement for individual recipients and subrecipients to seek approval for the extension. However, recipients and subrecipients should maintain documentation of the reason for the delayed filing.
On March 19, 2021, OMB released OMB Memo M-20-21. The memo instructs awarding agencies to allow recipients and subrecipients with fiscal year-ends through June 30, 2021, that have not yet filed their single audits as of the date Memo M-20-21 was issued (3/19/21), to delay the completion and submission of the single audit reporting package to six months beyond the normal due date.
No further action by awarding agencies is required to enact this extension, and individual recipients and subrecipients are not required to seek approval for the extension. However, as with previous extensions, recipients and subrecipients should maintain documentation of the reason for the delayed filing. Recipients and subrecipients taking advantage of this extension would still qualify as a “low-risk auditee.”
For example, a June 30, 2020, year-end single audit that has not yet been submitted will now be due September 30, 2021 (i.e., 6 months after the normal due date of March 31, 2021). Further, a December 31, 2020, single audit that has not yet been submitted will now be due March 31, 2022 (i.e., 6 months after the normal due date of September 30, 2021).
This new extension is longer than the previous extension provided in the above mentioned 2020 Compliance Supplement Addendum, extends to later fiscal year-ends, and is not linked to the receipt of COVID-19 funding. OMB confirmed that its intent was to be more generous with this extension than previous extensions. Auditees should be aware that the “30 calendar days after receipt of the auditor’s report” aspect of the single audit due date continues to apply.
Are there other implications?
Organizations that receive other forms of federal financial assistance may find challenges in understanding both new and revised compliance requirements. The terms and conditions for a particular award may be missing some of the important information that is typically included.
For example, agency implementation guidance has been issued slowly, making it difficult for recipients and auditors to understand the federal compliance requirements and single audit requirements for these programs. There has also been a lack of guidance on the impact of relief act funding on costs and activities that are normally reimbursed from other funding sources.
On April 10, 2020, the AICPA Governmental Audit Quality Center (GAQC) posed many questions to the OMB regarding COVID-19’s impact on single audits and the subsequent passage of the relief acts. Some of those questions include seeking clarity for the following areas:
- Guidance on allowable activities
- Allowability of payroll costs for employees that are being retained and paid, but may not be working
- Required documentation to support time and effort requirements when employees are not physically in the office
- How to comply with the procurement and cash management guidelines
We plan to monitor this and share additional guidance on these issues when it is released.
How can we help?
CLA is here to help you navigate the compliance requirements under the various assistance programs. We can also work with you to develop effective strategies for implementing grant management policies and procedures to prepare for federal program audits. For more information, please contact us.