2020 Compliance Supplement Addendum – key single audit considerations
By Amanda Blomberg, CPA, firm director, Baker Tilly
January 6, 2021
Updated Jan. 6, 2021
On Dec. 22, 2020, auditors received the much-anticipated U.S. Office of Management and Budget (OMB) 2020 Compliance Supplement Addendum (Addendum). Similar to the original release of the 2020 Compliance Supplement in August, the Addendum is effective for fiscal years ending June 30, 2020, and beyond. Most notably, it contains audit guidance related to programs funded by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, but auditors should be aware of other changes as well, some of which are summarized below.
Extension of filing due dates
Due to the onset of the COVID-19 pandemic, previous OMB actions extended single audit filing deadlines by various degrees. However, the last fiscal year-end with an active extension was Dec. 31, 2019. The Addendum allows for a three-month filing extension for years ending between Jan. 1, 2020, and Sept. 30, 2020.
While no action from federal agencies is needed by auditees to approve the extension, the auditee
must have received COVID-19 funding in order to be eligible for it and they
must document the reason for using the extension, i.e., due to receipt of COVID-19 funding.
Part 4 – Agency Program Requirements
Part 4 of the Compliance Supplement contains audit guidance for specific federal programs. The Addendum contains guidance for seven new programs, listed below.
| Program CFDA Number and Title |
Typical Recipients |
Special Notes |
| 16.034 Coronavirus Emergency Supplemental Funding Program |
States, local governments, tribes and territories |
Law enforcement equipment, supplies, payroll and training. |
| 21.019 Coronavirus Relief Fund (CRF) |
States, local governments, tribes and territories |
Focus on connection to recipient’s response to COVID-19 emergency and incurred within the allowable timeframe. |
| 32.006 Telehealth Program |
Health care providers |
Telehealth expansion. |
| 84.425 Education Stabilization Fund (ESF) |
Local school districts and institutions of higher education |
Letter suffixes applied to CFDA Number dictate guidance and reporting requirements specific to that funding stream. |
| 93.461 Uninsured Testing Portal |
Health care providers |
Reimburses providers for COVID-19 testing of uninsured individuals at Medicare rates. |
| 93.498 Provider Relief Fund (PRF) |
Health care providers, states, local governments, tribes and territories |
Introduces the concept of reporting lost revenues on the SEFA. No expenditures should be reported on the SEFA until Dec. 31, 2020, year-ends. |
| 20.218 / 20.237 Federal Motor Carrier Safety Assistance (FMCSA) Cluster |
States, local governments and tribes |
Unrelated to COVID-19 funding. |
In addition, the Addendum includes updated guidance for the following existing programs:
- 10.001 USDA – Multiple Program COVID-19 Waivers for Food and Nutrition Service Programs
- 14.862 Indian Community Development Block Grant (CDBG)
- 93.153 Coordinated Services and Access to Research for Women, Infants, Children, and Youth
- 93.914 HIV Emergency Relief Project Grants
- 93.917 HIV Care Formula Grants
- 93.918 Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease
Auditors should consult this list to determine applicability to their clients and ensure that compliance testing addresses the direct and material compliance requirements. As is the case with other federal programs, the guidance in Part 4 should be used in conjunction with the compliance requirements deemed direct and material in Part 3 – Compliance Requirements, discussed below.
Part 3 – Compliance Requirements
Part 3 of the August Compliance Supplement contains general audit guidance for all federal programs and should be used in conjunction with Part 4 – Agency Program Requirements, if applicable.
If you were performing single audits five to six years ago, you may remember the Federal Funding Accountability and Transparency Act (FFATA) reporting requirement that became subject to testing. This requirement was subsequently removed from audit coverage within a couple of years, although auditees were still required to complete the FFATA reporting. The Addendum brings back the FFATA reporting requirements to Part 3 using a phased-in approach.
The basics remain the same – direct recipients of federal awards who make first-tier subawards of $25,000 or more must report those subawards through the FFATA Subaward Reporting System (FSRS). This information becomes searchable at
www.usaspending.gov.
The differences with the application of the FFATA testing requirements expected in the Addendum revolve around when the requirements apply and to whom:
- For fiscal years ending June 30, 2020, through September 30, 2020, the FFATA requirements only apply to COVID-19 programs (except CRF) if Reporting is marked as “Y” in Part 2 – Matrix of Compliance Requirements and the auditee made first-tier subawards greater than $25,000.
- For fiscal years ending after September 30, 2020, the FFATA requirements will apply to all major programs, regardless of whether COVID-19 funding is involved or not.
The Addendum is expected to provide more detailed guidance on how auditors should test the information submitted and how to report testing exceptions.
Part 2 – Matrix of Compliance Requirements
New programs added to the matrix via the Addendum are denoted with bold type and a “new” notation. As mentioned in the listing of new programs added, the FMCSA Cluster is a new program, however, it is not related to COVID-19 funding.
In addition, there will be corrections of errors that were noted in the original Compliance Supplement released in August 2020.
SEFA presentation of COVID-19 funding
All programs that involve COVID-19 funding, both new and existing, should segregate those funds on the schedule of expenditures of federal awards (SEFA). The program title should be preceded with a “COVID-19” notation.
For example, CFDA No. 14.218 Community Development Block Grant might have COVID-19 funding and regular entitlement funding. Presentation would be as follows:
COVID-19 Community Development Block Grant 14.218 $1,000,000
Community Development Block Grant 14.218
2,000,000
Total Community Development Block Grant 3,000,000
COVID-19 notations should also be included in the Data Collection Form.
Due to the ability to apply different COVID-19 funding sources to the same expenditures, auditees may run into challenges when determining expenditures to report on the SEFA. This could lead to difficulties in verifying the completeness or accuracy of a SEFA, specifically where there may be inconsistencies with revenue recognition under generally accepted accounting principles (GAAP) in the auditee’s financial statements, such as with the PRF.
Donations of personal protective equipment (PPE) should be reported at its fair market value in the footnotes to the SEFA and labeled as unaudited. These donations are not factors in the single audit threshold, Type A/B threshold or major program determination.
The topics in this article do not address all of the nuances that COVID-19 funding has presented for auditors and auditees, so it is important to closely review the information in the Addendum and the related links provided within the Addendum when it is available.
Amanda Blomberg is a firm director at Baker Tilly US and specializes in the state and local government industry. She also leads Baker Tilly’s single audit practice, providing technical support, training and audit methodology development to the firm’s single audit practitioners. Amanda can be reached at 608-240-2386 or amanda.blomberg@bakertilly.com.
