Will You Be Subject to a Federal Single Audit After Receiving COVID Assistance? Here’s What You Need to Consider

2020 was a year that brought a great many changes to how companies operate day-to-day. In addition, countless organizations found themselves applying for and receiving funding from new sources. This could result in an unexpected outcomein2021: new audit requirements. Assistance programs offering relief from the COVID-19 pandemicthrough the Coronavirus Aid, Relief and Economic Security (CARES) Actare funded by the federal governmentand, therefore,may be subject to a single audit.

Overseen by the U.S. Office of Management & Budget (OMB), a single audit is a compliance audit, performed in conjunction with a financial statement audit, to provide assurance on the recipient’s compliance withtherequirements of federal award programs from which it received funding. Most federal awards are assigned a Catalog of Federal Domestic Assistance (CFDA) number, which identifies the funding agency and award program.Annually, OMB issues a Compliance Supplementdetailingthe compliance requirements for each CFDA number.

A single audit is required once anonfederal entityexpends $750,000 or more of federal awards duringtheirfiscal year.However,not all federal awards are received directly from the federal government. It is often the case that federal awardsmay be received indirectly, where funding ispassed-through one or more organizations, such as state agencies,to subrecipient organizationsbefore beingspent. In addition to federal requirements, some states also require compliance audits related to state awards.Whenever applying for or accepting new funding, it is best to ask if you will be receiving any federal funds and, if so, the relevant program(s).

Once youhave determined whetherthe organization hasreceivedany federal funding that may be subject to single audit requirements, here are a few tips to ensure youare prepared for a single audit:

• Knowtheprogram(s)– compliance requirements are different for each federal program; for example, some programs requirean evaluation ofwhether individuals receiving financial assistance meet specific income or other eligibility requirements.Reviewing OMB’s Compliance Supplement and Subpart F of Uniform Guidance will provide additional information on the audit and compliance requirements relevant to your program(s).
• Documenttheprocess – for each federal award,the organizationshould develop and document control procedures for ensuringcompliancewith the grant requirements.OMB’sCompliance Supplement includes an appendix with examples of controls which can help satisfy each compliance requirement.

Some of the new CARES Act programs subject to asingleaudit include:

Funding received through the Payroll Protection Program (PPP) is not subject to thesingleaudit requirement.

Author: Matthew Dittmann, CPA | [email protected]