By Zeeshan Ali, CPA
The U.S. Office of Management and Budget (“OMB”) issued a memo on Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to the loss of operations. The memo brought some misconceptions regarding the single audit submission deadline. Although an extension has been provided, it was granted only to certain entities and does not apply to all recipients. The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided economic relief to many organizations, however, this raised a question as to whether or not these funds will be subject to the Single Audit requirements, and its impact on the filing requirements.
Impact of PPP Loans by Not for Profits:
According to the AICPA Governmental Audit Quality Control Center (GAQC), if a Not for Profit organization has obtained loans under the Paycheck Protection Program, these loans will NOT be subject to the Uniform Guidance Single Audit requirements. However, if the Not for Profit organization has obtained loans under the Small Business Administration (SBA) Economic Injury Disaster relief Loan program (EIDL) for COVID-19, these loans will be subject to the single audit and major program determination requirements. The OMB has not yet released the guidance regarding presentation of these loans in the Schedule of Expenditures of Federal Awards and the Catalog of Federal Domestic Assistance (CFDA) numbers though. This results in a series of unanswered questions regarding the compliance requirements, and the audit challenges.
Filing extensions for Not for Profit entities:
The OMB issued M-20-17 on March 19, 2020, which extended the timeline for single audit submission as follows:
- Automatic six months extension is granted to NFPs through June 30, 2020 fiscal year ends
- Granted to NFPs affected by the crisis caused by the loss of operations and/or increased costs due to Covid 19
- NFP entities are required to document the reason for the delay and include this documentation when filing the audit reporting package (it will be important for us to remind clients that they will need to document if they choose to extend beyond their due date)
- The U.S Department of Housing and Urban Development (HUD) Real Estate Assessment Center (REAC) has extended filing deadlines for Multifamily Housing Entities audit submissions that are due April 30 and May 31.
Additional guidance for federal agencies:
The memo M-20-11 issued by OMB on March 9, 2020 is intended to provide guidance to federal agencies relating to grant class exceptions in instances where the agency has determined that the purpose of the Federal awards is to support the continued research and services necessary to carry out the emergency response related to COVID-19. The OMB authorized the federal awarding agencies to take the following actions, as they deem appropriate:
- Flexibility with SAM registration: Awarding agencies can relax the requirement for active System for Award Management (SAM) registration at time of application in order to expeditiously issue funding.
- Flexibility with application deadlines: Awarding agencies may provide flexibility with regard to the submission of competing applications in response to specific announcements, as well as unsolicited applications.
- Waiver for Notice of Funding Opportunities (NOFOs) Publication: For competitive grants and cooperative agreements, awarding agencies can publish emergency Notice of Funding Opportunities (NOFOs) for less than thirty (30) days without separately justifying shortening the timeframes for each NOFO. Awarding agencies would still be required to document and track NOFOs published for less than thirty (30) days under this emergency waiver
- No-cost extensions on expiring awards: To the extent permitted by law, awarding agencies may extend awards which were active as of March 31, 2020 and scheduled to expire prior or up to December 31, 2020, automatically at no cost for a period of up to twelve (12) months.
- Abbreviated non-competitive continuation requests: For continuation requests scheduled to come in from April 1, 2020 to December 31, 2020, from projects with planned future support, awarding agencies may accept a brief statement from recipients to verify that they are in a position to: 1) resume or restore their project activities; and 2) accept a planned continuation award
- Allowability of salaries and other project activities: Awarding agencies may allow recipients to continue to charge salaries and benefits to currently active Federal awards consistent with the recipients’ policy of paying salaries (under unexpected or extraordinary circumstances) from all funding sources, Federal and non-Federal. Awarding agencies may allow other costs to be charged to Federal awards necessary to resume activities supported by the award, consistent with applicable Federal cost principles and the benefit to the project.
- Allowability of Costs not Normally Chargeable to Awards: A warding agencies may allow recipients who incur costs related to the cancellation of events, travel, or other activities necessary and reasonable for the performance of the award, or the pausing and restarting of grant funded activities due to the public health emergency, to charge these costs to their award.
- Prior approval requirement waivers: Awarding agencies are authorized to waive prior approval requirements as necessary to effectively address the response.
- Exemption of certain procurement requirements: Awarding agencies may waive the procurement requirements contained in 2 CPR§ 200.319(b) regarding geographical preferences and 2 CPR§ 200.321 regarding contracting small and minority businesses, women’s business enterprises, and labor surplus area firms.
- Extension of financial, performance, and other reporting: Awarding agencies may allow grantees to delay submission of financial, performance and other reports up to three (3) months beyond the normal due date.
- Extension of currently approved indirect cost rates: Awarding agencies may allow grantees to continue to use the currently approved indirect cost rates (i.e., predetermined, fixed, or provisional rates) to recover their indirect costs on Federal awards. Agencies may approve grantee requests for an extension on the use of the current rates for one additional year without submission of an indirect cost proposal.
- Extension of closeout: Awarding agencies may allow the grantee to delay submission of any pending financial, performance and other reports required by the terms of the award for the closeout of expired projects, provided that proper notice about the reporting delay is given by the grantee to the agency. This delay in submitting closeout reports may not exceed one year after the award expires.
- Extension of Single Audit submission: Awarding agencies, in their capacity as cognizant or oversight agencies for audit, should allow recipients and subrecipients that have not yet filed their single audits with the Federal Audit Clearinghouse as of the date of the issuance of this memorandum that have fiscal year-ends through June 30, 2020, to delay the completion and submission of the Single Audit reporting package, to six (6) months beyond the normal due date.
As stated in the memorandum, the 13 provisions noted above were addressed to the Federal awarding agencies. However, it is worth noting that several of the provisions permit Federal agencies to relax certain requirements for grantees (that would mean those who receive direct funding). For our clients, we have some who receive Federal funding and many others who receive pass-through funding from State agencies. When planning for our single audits it will be necessary to determine if our pass-through entity has been permitted any of the provisions above from either a Federal or State agency.
Barbacane, Thornton & Company is a highly regarded, regional certified public accounting and consulting firm specializing in auditing and tax services for government agencies and nonprofits.