Final 2021 Single Audit Update

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2021 Single Audit Update: What to Know and How to Prepare

[webinar Title] 2©2021, CCH Incorporated. All Rights Reserved.

2021 Single Audit Update:What to Know and How to Prepare

Kelly Rancourt, CPA & Troy Rector, CPA

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Today’s Topics

• Single Audits: At-A-Glance

• Single Audits: What’s New

• Single Audits: What to Expect


Single Audits: At-A-Glance

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52021 Single Audit Update:

What to Know and How to Prepare

2019 Single Audit Stats

Total Single Audits 36,113

No 36%

Yes 64%

Adverse Opinion 24

Modified Opinion 964

Unmodified Opinion 35,114

Disclaimer 11

Low Risk Auditee

Type of Report - Single Audit Report

Yes 16%

No 84%

Compliance Findings?

None 86%

Significant Deficiency 9%

Material Weakness 5%

Compliance Internal Control Findings



Single Audit Stats (Continued)

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More Single Audits – 2021, 2022…

• State and local governments received large amount of Federal COVID assistance including the Coronavirus Relief Fund

▪ Not-For Profit and local government entities receiving pass-through funding as subrecipients

• Healthcare entities that have not previously had Single Audits may have received significant Provider Relief Funds

- Single Audit requirements (NFP, Gov’t) > $750,000

- Commercial entities

• Financial statement GAGAS audit or Single Audit

• Federal agencies incorporating audit requirements into certain COVID-19 programs applicable to Commercial entities

▪ Provider Relief Fund

▪ Sheltered Venue Operator Grant

▪ Others - ?


Single Audits: What’s new?

• Navigating COVID-19

• 2020 OMB Compliance Supplement

• Schedule of Expenditures of Federal Awards

• Uniform Guidance Update

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Navigating COVID-19:Single Audits

COVID-19 Federal

Assistance

Major Program

Determination

Internal Controls

OMB Memos



CARES Act

Paycheck Protection Program

(>$600B)

Federal Agency: SBA

For-profits, NFPs

Is not subject to single audit

CFDA: 59.073

Provider Relief Fund

($175B)

Federal Agency: HHS

For-profits, NFPs, Governmental Entities

Is subject to single audit

CFDA: 93.498

Coronavirus Relief Fund

($150B)

Federal Agency: Treasury

Governmental Entities and Tribes


CFDA: 21.019

Educational Stabilization Fund

($30.75B)

Federal Agency: Education

States, Schools, IHE


CFDA: 84.425

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American Rescue Plan Act

Coronavirus State and Local Fiscal Recovery Fund

• $350B

• Local gov’t support

• Capital projects fund

• Single Audit- pending

Emergency Rental Assistance Program

•Assistance Listing #21.023

•$21.5B

•Emergency rental and utility assistance

•Homeowners aid

Education Stabilization Fund

• $122.7B

• Local education agency funding

Transportation and Infrastructure

•$50B - Disaster Relief Fund•$3B – Economic Development Administration



COVID-19 Programs:Uniform Guidance & Single Audit Applicability

Assistance

Listing Number Program Name

Uniform Guidance

Applicable?

Subject to Single

Audit?

59.073 Paycheck Protection Program Loan No No

93.498 Provider Relief Fund Subparts B, F Yes

21.019 Coronavirus Relief Fund Limited Yes

59.075 Sheltered Venue Operator Grant Program Subparts B, C, D, E Yes

21.023 Emergency Rental Assistance Program Subparts B, C, D, E Yes

93.461 COVID-19 Testing for the Uninsured Subparts B, D, E Yes

AICPA GAQC COVID-19 Federal

Program Tool (link)

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https://www.aicpa.org/content/dam/aicpa/interestareas/governmentalauditquality/resources/singleaudit/uniformguidanceforfederalrewards/downloadabledocuments/gaqc-summary-of-applicability-for-new-coronavirus-related-fed-programs-20200616.pdf

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Major Program Determination:COVID Considerations by the Step

Step 1 — Determination of type A and type B programs

• Properly calculate Type A and Type B program thresholds when Federal assistance > $25M [prior year < $10M]

• Appendix III – Impact of OMB adding new Federal programs to existing “other clusters”

Step 2 — Identification of low-risk type A programs

• Federal agencies to issue guidance on considering certain COVID-19 Federal programs “higher” risk [2021 OMB Compliance Supplement]

• Limited inherent risk consideration – Significantly increased risk?

▪ Federal agency oversight

▪ Identification as “higher risk” – OMB Compliance Supplement – Appendix IV

▪ Results of recent monitoring

▪ Changes in personnel

▪ Changes in systems



Major Program Determination:COVID Considerations by the Step

Step 3 — Identification of high-risk type B programs

• Remember: Type B risk assessment(s) only required if low risk Type A programs are identified

• Type B inherent risk criteria

▪ Consider newness of the program

▪ Impact of COVID-19 Federal assistance added to existing Federal program

Step 4 — Determination of programs to be audited as major

• Double check major program determination once Final SEFA has been drafted

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Single Audit Consideration:COVID-19 Internal Controls

Auditor considerations

• Can we rely on prior year control understanding for major programs?

• Has the client updated processes and controls for remote work and new systems implemented?

• How should I plan my audit procedures if the client has noted there were interruptions impacting control effectiveness?



Single Audit Consideration:New COVID-19 Controls

• My client received new COVID funding, what controls have they implemented for these programs?

▪ The money had to be spent quickly, did they have time to implement controls?

▪ How are these controls documented and do they have procedures established for these funds?

▪ Should I still plan my audit for a low level of control risk?

▪ This is their first single audit, what controls did they implement?

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OMB COVID-19 OMB Memoranda

OMB Memoranda are issued to Federal Agencies

OMB Memo M-20-17

• Instructions to Federal agencies to adopt flexibilities

• Allowability to continue to charge wages under emergency circumstances

• Allowability of certain costs normally not chargeable to Federal awards

• Limited procurement flexibilities (not sole source)

• 6-month Single Audit extension

OMB Memo M-20-26

• Instructions to Federal agencies to adopt flexibilities

• Extension of previous flexibilities to September 30, 2020

• Rescinded Single Audit extension only providing extension up through 12/31/2019 Single Audit engagements

OMB Memo M-21-20

• Financial assistance to for-profit organizations

• Apply UG to all federal financial assistance awarded through ARP

• No-cost extension

• 6-month Single Audit extension

Not to be confused with CARES Act Section 3610 flexibilities applicable to Federal contracts



Single Audit Extension:OMB Memo M-21-20

• Provides a 6-month submission extension for Single Audits not yet submitted covering fiscal year ends through June 30, 2021

• No approval required

• No explicit conditions (i.e. receiving COVID-19 assistance, etc.)

• Auditee to maintain documentation on need for the extension

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Compliance Supplement

• Issued annually

• Required to be used By Auditors in a Single Audit

• OMB’s Suggested Audit procedures

• Specific Federal program information including select Federal COVID-19 programs

• OMB Single Audit Advisories



Compliance Supplement

• Issued in 2 releases this year

• August 2020

▪ Issued in August for items developed prior to COVID

▪ Effect for audits of fiscal years beginning after June 30, 2019

• December 2020 – COVID-19 Addendum

▪ COVID-19 Compliance Supplement Addendum

• 2021 Compliance Supplement – Anticipated Summer 2021

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Compliance Supplement – August 2020

• Key Changes

▪ Regular updates unrelated to COVID-19

▪ 6-requirement mandate maintained – some agencies did change the requirements subject to audit

▪ Removal of Part 3-1

▪ Appendix VII includes a new section on COVID-19 implications



Review Questions 1 - 3

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December 2020 – COVID-19 CS Addendum

• Key Contents

▪ Single Audit extension

▪ Testing guidance for select Federal COVID-19 programs

▪ Federal Funding Accountability and Transparency Act Report testing –ADDED

▪ Federal Agency COVID-19 Program Guidance.



December 2020 – COVID-19 CS Addendum

• Existing Federal programs w/ COVID-19 funding▪ 10.001 USDA Multiple Program COVID-

19 Waivers for Food and Nutrition Service Programs

▪ 14.862 Indian Community Development Block Grant ($100M)

▪ 93.153 Coordinated Services and Access to Research for Women, Infants, Children, and Youth ($5M)

▪ 93.914 HIV Emergency Relief Project Grants ($26M)

▪ 93.917 HIV Care Formula Grants ($24.5M)

▪ 93.918 Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease ($30M)

• New Federal Programs

▪ 16.034 Coronavirus Emergency Supplemental ($850M)

▪ 21.019 Coronavirus Relief Fund ($150B)

▪ 32.006 Telehealth Program ($200M)

▪ 84.425 Education Stabilization Fund ($30B)

▪ 93.498 Provider Relief Program ($175B)

▪ 93.461 Uninsured Testing Portal ($2B)

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Provider Relief Fund - Summary

• Provides relief funds to hospitals and other healthcare providers on the front lines of the coronavirus response. The funding supports healthcare-related expenses or lost revenue attributable to COVID-19 and to ensure uninured Americans can get treatment for COVID-19.

• Funds must be expended by June 30, 2021

• For-profit’s, NFP’s, Governmental Entities

• Assistance Listing #93.498

• Uniform Guidance [45 CFR Part 75] does apply but only Subparts B and F

• For-profit Single Audit options Under 45 CFR Part 75.216:

✓ Single Audit

✓ Financial statement (HHS programs) GAGAS audit

• PRF FAQ’s & Reporting Guidelines



Coronavirus Relief Fund - Summary

• The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") established the $150 billion Coronavirus Relief Fund ("the Fund"). Payments must be used for necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19) between March 1, 2020, to December 30, 2020 (extended to December 31, 2021).

• Direct payments to State and Local Governments

• Assistance Listing #21.019

• Uniform Guidance – only following section apply:

• 200.303 – Internal Controls

• 200.330 - .332 – Subrecipient Monitoring

• Subpart F – Single Audit

• Other Sources:

✓ CRF FAQ’s

✓ CRF Guidelines

✓ Treasury OIG FAQ’s

✓ State and Local agreement/contract

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Federal Funding Accountability and Transparency Act (FFATA)

• 2020 OMB Compliance Supplement Addendum included the addition of FFATA reporting testing

• Transition

▪ Applicable to COVID-19 programs included in addendum, except CRF

▪ Audits of fiscal year ends after 9/30/20, applicable to all major programs, regardless of COVID-19

• Auditors must test FFATA when Reporting is direct & material…if applicable



What is FFATA and who does it apply to?

• Applies to direct recipients who make first tier subawards and contracts that award first tier subcontracts

• Subaward: legal instrument to provide support for performance of a project or program for which a recipient received a grant, and that is awarded to an eligible subrecipient

• Subcontract: subcontract awarded directly by a contractor to acquire supplies or services for performance of a prime contract

• Must report each first-tier subaward, subcontract or amendment that results in an obligation of $25,000 or more of federal funds

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Suggested FFATA Audit Procedures

• Obtain an understanding of internal control, assess risk and test internal control as required

• Obtain a list of first tier subaward agreements, amendments and modifications

▪ Ensure completeness of population

• Select a sample to determine if subject to FFATA requirements based on

1) date of award

2) amount of award



Suggested FFATA Audit Procedures

• If subject to reporting under FFATA:

• Ensure award is reported in the FSRS

• Compare award information in FSRS to grant documents

▪ Are key elements reported?

▪ Do all agreements, amendments, modifications match?

▪ Reported timely? (no later than last day of month following month of subaward)

• Summarize any noncompliance information for inclusion in findings (reports not made, incorrect data, not timely)

▪ Compliance Supplement defines data to report

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COVID-19 SEFA Reporting

Identification of Federal COVID-19 assistance on the SEFA

• Primarily CARES Act assistance

• COVID-19 awards “should” be presented separately and identified as such

• SEFA Audit program includes specific procedures –



SEFA Disclosure: Personal Protective Equipment

• OMB Memo M-20-20 provided for the donation of Federally Funded PPE to non-Federal entities

• Should disclose in the SEFA fair market value of Federally funded PPE received

▪ Mark as “unaudited”

• Will not impact Single Audit major program determination

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When Should Activity Go on the SEFA

• New Federal COVID-19 Programs are introducing challenges to normal process

▪ Cash received well before award/terms and conditions agreed to

▪ New concept of lost revenues

▪ Ability to choose which costs are charged to a particular award is at a level we have not encountered before

• Rule of Thumb – SEFA Presentation

▪ Underlying activity occurs

▪ There is an award/terms of conditions

▪ Not necessarily tied to GAAP recognition of revenue

• Challenges surrounding timing of reporting Provider Relief Rundassistance on the SEFA



Provider Relief Fund - SEFA Reporting

Year-End SEFA Reporting Determining Expenditures

Prior to December 31, 2020 PRF not included None

December 31, 2020 2020 PRF costs and lost revenues

Based on December 31, 2020 Reporting to HHS

After December 31, 2020 –Before June 30, 2021

2020 PRF costs and lost revenues

Based on December 31, 2020 Reporting to HHS

June 30, 2021 TBD – 2021 OMB Compliance Supplement

TBD – 2021 OMB Compliance Supplement

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SEFA EXERCISE A



SEFA EXERCISE B

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Uniform Guidance Revisions: Effective Dates

Existing Uniform Guidance

Federal awards existing prior to November 12, 2020

Telecommunication Costs & Terminations

All new Federal awards and modification of existing awards on or after August 13, 2020

Revised Uniform Guidance

All new Federal awards and modification of existing awards on or after November 12, 2020



Changes to Uniform Guidance

• Indirect Costs

▪ Expanded use of the De Minimis Rate

▪ Pass-Through Entity negotiated indirect cost rates with Subrecipients

• Procurement

▪ Micro-purchase thresholds increased up to $50k for qualifying entities

▪ Formal and informal procurement procedures

• Other Changes include:

▪ Introduction of Budget Periods concept

▪ Extension of Close-Out Periods to prime recipients

• Be aware of Section 889 (the “Huawei Ban”, 200.216 and 200.340) that effects cost principles covering telecommunications equipment and services (200.471)

▪ Requirements different for Federal Grants and Cooperative Agreements vs. Federal Contracts

• DHHS, NSF and select other Federal agencies required to update Uniform Guidance unless 2 CFR Part 200 is already incorporate, by reference, in the Federal agency’s adoption of the Uniform Guidance

▪ Unclear how the Federal Agency delay, for example DHHS, impacts the ability to adopt provisions including the increase of the Micro-purchase threshold to above $10,000

FAQ’s issuedMay 2021

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Uniform Guidance Updates – Subpart F (aka Single Audit)

• Cognizant Agency for Audit Responsibilities

▪ Non-Federal entity expending over $50M in Federal expenses

▪ Federal agency with predominant amount of direct Federal funding

▪ When direct funding is less than 25% of total Federal expenditures, then the Federal agency with predominant amount of Federal funding

• OMB Quality Control Reviews

▪ Required to be performed once every 6 years or at other such interval as determined by OMB

▪ Government-wide project can rely on current and on-going quality control reviews performed by Federal agencies, State auditors and professional audit associations


Single Audit: What to Expect?

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How to Prepare

Key Considerations For a Successful Audit:

• Prepare a summary sheet for each award with all pertinent information (award period, amount, matching provisions and any special terms and provisions) for your program and accounting staff

• Use accounting software to separately track all revenues and expenses of each award.

• Auditors are required to test internal controls over compliance. Be ready to have your compliance controls documented and ensure they are effective throughout year.

• Sampling of transactions is a common single audit approach. Prepare early so that all documentation can be gathered and be available when the audit begins.



How to Prepare - Continued

Key Considerations For a Successful Audit, Continued:

• Ensure that all relevant policies are documented and available

▪ Many transactions are only allowable if under written policies (especially compensation)

▪ Single audit will test that your entity’s policies meet compliance requirements and then test transactions against your policy (procurement, subrecipient monitoring)

• Retain documentation throughout the year supporting any judgments on why a cost was reasonable, allocable, allowable and necessary

• There are many steps in a single audit so keep coordinated on due dates and project management both internally and with your auditor.

• Reach out to your auditor with questions throughout the year

• Keep program and accounting staff educated on Uniform Guidance compliance

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How to Prepare - Continued

Resources:

• Uniform Guidance

• OMB Compliance Supplement

▪ Part 3 outlines compliance requirements and suggested audit procedures

▪ Part 4 provides additional direction on testing for specific funding

▪ Part 5 provides guidance on clusters of programs (R&D, Student Financial Assistance, etc.)

▪ Part 6 discusses internal controls over compliance requirements and has example controls that could be in place.

• https://beta.sam.gov/ provides additional information on federal programs



What If I Have a Finding?

• Discuss the facts and any mitigating circumstances with your auditor

• Review the written finding

• Prepare your response and corrective action plan

• May have to repay some costs

• Can affect the amount of audit testing in future years

• Appeals process with the Federal Agency is available

• May impact future funders’ risk assessment of your organization and your NFP and may receive reduced future discretionary Federal awards.

• Federal Agencies can also impose more restrictive reporting or other requirements.

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https://beta.sam.gov/

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Audit Finding Follow Up

• Prepare a corrective action plan for current year findings

▪ Reference auditor assigned reference numbers

▪ Name(s) of the contact person(s) responsible for the corrective action

▪ Corrective action planned

▪ Anticipated completion date

• If Auditee does not agree with findings or believes a corrective action plan is not required, then the auditee response to the finding must include an explanation and reasons for that determination.



Review Questions 4 - 6

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Thank You for Attending Today’s Program



Final Exam

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Final 2021 Single Audit Update

Documents

Transcript of Final 2021 Single Audit Update