- Determine whether Uniform Guidance single audit requirements apply to your entity.
- Retain proper documentation to support compliance.
- Evaluate costs and expenses to determine they align with the period of performance.
- Evaluate terms and conditions of subgrant agreements for proper documentation and monitoring of subrecipients.
Get help with your single audit.
Many state, local, and tribal governments are about to undergo their first single audit due to the Coronavirus Relief Fund (CRF) which was funded under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Take a look at some common compliance challenges and our recommendations for making your single audits easier.
Applicability of the Uniform Guidance
It is essential to determine whether the Uniform Guidance single audit requirements apply to your entity. However, this determination can be subjective at times, and is dependent on structure of the grant award and the capacity in which payments are received. Language that allows for programmatic decision-making, such as the ability to make eligibility determinations, is a key indicator that a subrecipient relationship exists.
Review your grant agreements and contact your granting agency to confirm the nature of the relationship and if you are a beneficiary or a subrecipient. Document and retain conversations to support your decision.
Documentation to support compliance
The CARES Act requires that payments from the Coronavirus Relief Fund only be used to cover necessary expenditures incurred due to the public health emergency with respect to COVID–19. This guidance was supplemented with several frequently asked questions (FAQs) now published in the Federal Register. The timing of the FAQs presented several challenges and caused many entities to reallocate costs that were previously applied to the grant.
As with any grant, oversight agencies and auditors need to evaluate the supporting documentation for the underlying transactions to determine allowability. For example, if public safety costs were accumulated in a cost center, and a portion of those costs were applied to a grant, auditors would expect that an analysis would have been performed to determine that all individuals in that cost center met the allowability requirement.
The Office of Inspector General for the Department of Treasury issued several memorandums identifying examples of documentation that would support compliance, such as subsidiary ledgers, time records, receipts, contracts, and electronic communications.
Overall, if you encounter a situation that requires a judgment call, we recommend that you document the date the interpretation was made, the rationale, and key individuals involved.
Period of performance
The CARES Act requires that payments only be used to cover expenses that were incurred during the period that begins on March 1, 2020 and ends on December 30, 2020 (later extended to December 31, 2021). Entities had to move swiftly to enact programs to assist their communities over the initial nine-month period, uncertain if an extension would be granted. Further, to avoid not utilizing the funds, many entities had to make quick and difficult decisions in late December on how to apply the funds — which are now subject to audit. Auditors will be examining the costs charged during those transition dates to determine if they were appropriately documented and allowable — be sure to review those costs prior to the audit.
Subgrant agreements and monitoring
Many state, local, and tribal governments utilized subrecipients as an efficient means to assist their communities during the pandemic. Now, entities that rarely, if ever, utilized subrecipients are required to follow unfamiliar compliance stipulations of the Uniform Guidance.
For example, a pass-through entity is required to evaluate “each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring.” Pass-through agencies must document this risk assessment prior to entering into an award, then use the assessment as their basis for monitoring activities. Pass-through agencies should also verify that the grant agreements contain the required components, risk assessments are properly documented, and monitoring procedures are planned, as these will likely be the initial requests from auditors.
How we can help
CLA’s experienced professionals can help you navigate the requirements of the CARES Act by:
- Offering resources to ease the burden of grant compliance
- Preparing you for federal program audits
- Providing risk management services
- Conducting single audits under the Uniform Guidance requirements
CLA is here to guide you through recovery. Allow us to focus on the complexities of compliance so you can focus on continuing to provide valuable services to your community.