Federal aid swiftly followed the disruption caused by the COVID-19 pandemic, with new programs coming from the Coronavirus Aid, Relief and Economic Security (CARES) Act and additional funding to existing programs. For-profit and not-for-profit organizations of all types received support in the form of grants and may now find themselves with new reporting requirements. For-profit organizations that received coronavirus relief funds may even be facing their first Single Audit under the Office of Management and Budget (OMB)’s Uniform Grant Guidance (UGG).
To clarify how the UGG may apply to the COVID-19 pandemic relief initiatives, the AICPA’s Governmental Audit Quality Center (GAQC) recently released a summary of which UGG requirements apply to which federal programs. The following illuminates what recipients of the Coronavirus Relief Fund, Education Stabilization Fund, Provider Relief Fund, or the Disaster Assistance Loan programs should know.
How We Got Here
The CARES Act expanded several existing federal programs administered by the Small Business Administration (SBA). It also established several new programs to help specific sectors that found themselves on the frontlines of the pandemic disruption. Some of the key programs include:
- Provider Relief Fund – Assistance for healthcare providers to help with patient expenses and purchases of pandemic-related medical equipment
- Disaster Assistance Loans – Economic Injury Disaster Loans (EIDLs) designed for small business owners and not-for-profit organizations
- Paycheck Protection Program – Potentially forgivable low-interest loans designed to help small businesses and not-for-profit organizations maintain their workforce
- Coronavirus Relief Fund – Assistance for state and local government groups
- Coronavirus Emergency Supplemental Funding Program – Funds for state and local government groups to help with procuring personal protective equipment and coronavirus-related overtime
- Education Stabilization Fund – Assistance for educational institutions to help with K-12 education models, workforce preparation programs, and higher education
A Closer Look at the Uniform Grant Guidance & COVID-19 Assistance
The AICPA GAQC’s publication indicates that the COVID-19 assistance programs are considered federal grants for reporting purposes, and therefore recipients of those federal grants should be prepared to meet UGG requirements. There are several subparts of the UGG, including:
- General provisions and applicability of the UGG and effective dates (Subpart B)
- Provisions for administrative requirements for federal agencies receiving federal awards (Subpart C);
- Requirements for procurement, internal controls over federal awards and subrecipient monitoring (Subpart D);
- Cost principles (Subpart E), and
- Single audit requirements (Subpart F)
Here is a high level breakdown of which Subparts may apply to which type of assistance. The nuances of the application are expected to be ironed out in the forthcoming 2020 OMB Compliance Supplement, which is not expected to be released until the fall. Single audits cannot be finalized until the release of the 2020 OMB Compliance Supplement.
Name of Program
Applicable UGG Subparts
Provider Relief Fund
B, D & E
Funding provided to both for-profit and not-for-profit entities. The Department of Health and Human Services, as of the date of this alert, is weighing whether Subpart F, Audit Requirements, would apply.
Disaster Assistance Loans
C, D & E
Some nonprofit organizations may have received loans under this program that are subject to single audit in amounts of up to $2 million.
Paycheck Protection Program
Recipients of the PPP funding are not subject to the Single Audit requirement.
Coronavirus Relief Fund
D (only as applies to internal controls and subrecipient monitoring)
Many federal agencies will be passing through these proceeds to organizations, thereby making these organizations a subrecipient to federal funds. Treasury clarified that these funds are not considered grants but rather “other financial assistance”
Coronavirus Emergency Supplemental Funding Program
B, C, D & E
Recipients of these programs would be subject to the Single Audit as well.
Education Stabilization Fund
C, D & E
All subsections of this funding are considered to be one program. The Department of Education may require additional reporting. See here for more details.
Subpart D Compliance
Entities subject to the Subpart D requirement should establish and maintain effective internal control over these funds. A common internal control framework that will meet this requirement is the Internal Control Integrated Framework created by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Entities will also want to track if proceeds from their COVID-19 relief programs benefitted any subrecipients or contractors. Groups that qualify as subrecipients will require pre-award and post-award assessments to ensure the award was used as intended. Contractors and vendors, on the other hand, are not subject to this compliance requirement.
Conflicts of interest will need to be established for federal awards, including any potential conflicts with pass-through entities that receive award proceeds.
Preparing for Your First Single Audit
If you do find your organization is subject to the Subpart F single audit requirement, you may want to gather a team across applicable divisions to help inventory written policies surrounding use of awards. You should also convene with the audit team that will be performing the Single Audit to discuss the audit provided by client (PBC) list and what the audit team will be looking for during the audit. This can mitigate the risk of “surprises” emerging during the first audit.
The following resources may provide some additional context and insight related to the Single Audit under the Uniform Grant Guidance.
For More Information
For more information about the Single Audit, please contact Michelle Sylvia Spriggs at firstname.lastname@example.org.
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