On December 22, 2020, the Office of Management and Budget (OMB) issued its 2020 Compliance Supplement Addendum (Supplement Addendum) to provide guidance on auditing (CARES) Act money and other COVID-19 relief programs. The effective date for the Supplement Addendum is for audits of fiscal years beginning after June 30, 2019 and is to be used in conjunction with the August 2020 Compliance Supplement. Note that if you had to issue your single audit prior to the issuance of the Supplement Addendum, the August 2020 Compliance Supplement indicates that reports issued prior to the publication of the addendum are not required to adhere to the requirements in the addendum.
Below are the highlights of the supplement:
Audit Submission Extension
Organizations receiving COVID-19 funding with original due dates from October 1, 2020 through June 30, 2021 have been granted an extension for up to 3 months beyond the standard due date for the completion and filing of the Single Audit reporting package.
Schedule of Expenditures of Federal Awards (SEFA) Treatment of Provider Relief Funds (PRF)
The Supplement addresses questions about what amounts should be reported for PRF on the SEFA by recipients for fiscal year ends prior to December 31, 2020. PRF expenditures and lost revenue will not be included on SEFAs until December 31, 2020 year-ends and later. This approach will link SEFA reporting for PRF to the amounts to be reported directly to Health and Human Services (HHS) at calendar year-end and at June 30, 2021. This will only affect the PRF program and is not applicable to other COVID-19 funding that healthcare entities may have received.
Ensuring an accurate and complete SEFA will be critical. Note that your auditor may see a need for more internal control testing due to control changes at your organization, and the potential for increased compliance sample sizes if controls cannot be relied upon, as programs and amounts may be more difficult to identify for SEFA purposes.
Personal Protective Equipment (PPP) SEFA
The Supplement indicates that nonfederal entities that received donated PPE should include the fair market value of the PPE at time of receipt in a stand-alone note to the SEFA that can be marked unaudited. Also, the donated PPE will not be counted by your auditor for purposes of determining the threshold for a single audit, determining the type A/B program threshold for major programs, and is not required to be audited as a major program.
The Supplement includes a Part 2, Matrix of Compliance Requirements that identifies the requirements subject to audit for all new programs as well as existing programs that are included in the Supplement Addendum.
Compliance Requirement Added Relating to Federal Funding Accountability and Transparency Act (FFATA) Reporting
Per the Supplement, your auditor must test FFATA reporting for all the COVID-19 programs included in the Supplement Addendum (except for the Coronavirus Relief Fund program) where:
• The reporting type of compliance requirement is marked as a Y in the Part 2 Matrix and the auditor determines Reporting to be direct and material;
• The recipient makes first-tier subawards of $25,000 or more to report subaward data through the FFATA Subaward Reporting System (FSRS).
Your auditor will need to address this reporting requirement for all selected major programs for audits of fiscal years after September 30, 2020, regardless of whether COVID-19 funding is involved.