Single Audit Considerations
Under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) many not-for-profit, and some for-profit, entities were awarded federal funding in response to the COVID-19 pandemic, including, but not limited to, Provider Relief Funds (“PRF”) or Coronavirus Relief Funds (“CRF”). As a result, recipients of these new awards by the Federal Government may now find themselves being subjected to the requirements of a Single Audit for the first time. Preparing for the added complexity and compliance requirements of a Single Audit may seem overwhelming, but it doesn’t have to be.
What is a single audit?
The purpose of the Single Audit is to provide assurance to the Federal Government that a non-federal entity has adequate internal controls in place, and is generally in compliance with program requirements. Under Subpart F of the U.S. Office of Management and Budget (“OMB”) Uniform Guidance (“UG”), an organization-wide financial and compliance audit is required if an entity expends $750,000 or more of federal awards received for its operations.
Single Audit Determination
To determine if your organization is subject to a single audit the following steps should be completed:
- Compile all federal grant information, including grant award documentation and the Catalog of Federal Domestic Assistance (“CFDA”) number for each federal award.
- Prepare a preliminary Schedule of Expenditures of Federal Awards (“SEFA”), which outlines the amount the entity actually expended for each federal program.
- Determine if the entity received federal funding from multiple CFDA numbers.
- Generally, if the entity expended more than $750,000 under one CFDA, the entity would be subject to a Program Specific Audit.
- If the entity expended more than $750,000 under more than one CFDA, the entity would be subject to a Single Audit.
- If an entity expends less than $750,000 a year in federal awards, it is exempt from the audit requirements for the year; however, records must be kept for review or audit by appropriate officials of the federal agency and the Government Accountability Office.
Single Audit vs. Program Specific Audit
A Single Audit, previously known as an OMB Circular A-133 audit, is an entity-wide financial statement audit and federal awards audit of a non-federal entity that expends $750,000 or more in federal funds in one year. A program-specific auditâ€¯is an audit of an organization’s adherence to the compliance requirements that are direct and materialâ€¯to the individual federal program in which the company is enrolled (rather than a single audit, which includes an audit of an entity's financial statements and federal programs). The UG provides that when an organization expends federal awards under only one federal program (excluding research and development) and statutes, regulations, or the terms and conditions of the federal awardâ€¯do not require a financial statement audit, the organization may elect to have a program-specific audit performed in accordance withâ€¯2 CFR 200.507.
Provider Relief Funds
Late in December 2020, the OMB issued the Compliance Supplement Addendum to assist auditors and organizations in understanding the audit requirements for COVID-related programs. The Addendum added some considerations regarding the PRF funding to keep in mind when preparing the SEFA:
- Expenditures for purposes of the SEFA under the PRF program include expenses related to this program plus lost revenue amounts.
- ForPRF program only, regardless of your organization’s year-end,theSEFA expenditures and lost revenue shall be based on the calendar year ended December 31, 2020 in order for ittomirrorthereportingthatwillbedonetoHHS’s portal, once opened. To further clarify:
- An entity with year-end before December 31, 2020 would report no PRF on their SEFA.
- A year-end from December 31, 2020 to before June 29, 2021 would report calendar year 2020 expenses and lost revenue on its SEFA.
- For an entity with a year end of June 30, 2021 and later will have further guidance available once the 2021 Compliance Supplement is issued.
Timing & Filing Requirements
The Single Audit or Program Specific Audit are due to the government within 30 days of the financial statement audit or nine months after the final day of the audit period, whichever comes first. Due to the late issuance of the Compliance Supplement Addendum, if the entity received some form of COVID-19 funding, the OMB is providing a three-month extension for audits of 2020 year-ends through September 30, 2020. There is no requirement for an entity to seek approval for the extension, but the addendum advises that the entity should maintain documentation of the reason for the delayed filing.
How We Can Help
The guidance related to certain CARES Act funding continues to evolve since the funds were distributed. Citrin Cooperman is ready and able to assist your organization in navigating the complexities of the UG regulations and compliance requirements and reporting.
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