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COVID-19 Impact to Uniform Guidance

COVID-19 continues to impact our society, on both a personal and professional level. Challenges arising from restrictions on public gatherings and events, implementation of remote/virtual offices for employees, and school closures, to name a few, are increasing the strains on all of our communities. This, coupled with the volatility experienced within the bond and equity markets, erosion of investment gains, shuttering of businesses, and record-level unemployment, has shown that the need for assistance has never been greater. As a result, several emergency relief funds and other public support vehicles have been created to aid not-for-profits in carrying out their missions. In addition, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act also provided certain federal aid to eligible not-for-profit organizations via the United States Small Business Administration (“SBA”). Discussed below are some additional considerations and actions taken by various governmental agencies to aid in these unprecedented times.

Filing Extensions and Other OMB Updates 

As a result of COVID-19, the U.S. Office of Management and Budget (“OMB”) released two memos providing short-term relief for audit and other requirements under 2 CFR Part 200, Uniform Administrative Requirements, Cost principles and Audit Requirements for Federal Awards.

On March 9, 2020, the OMB issued M-20-11, "Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly impacted by the Novel Coronavirus (COVID-19)," which provides a twelve month extension in Single Audit filing specifically for federal award recipients who are receiving funds under H.R. 6074 for coronavirus preparation and response.

On March 19, 2020, the OMB issued memorandum M-20-17 for entities receiving federal funds to allow an extension to file the Single Audit report. The extension more broadly applies to entities with year-ends through June 30, 2020 that have experienced a loss of operational capacity due to the COVID-19 crisis, and have not yet filed Single Audit reports with the Federal Audit Clearinghouse (“FAC”) as of the date of the memorandum. The extension provides for delayed submission of the Single Audit reporting package up to six months beyond the original due date (which is normally the earlier of thirty days after receipt of the auditor’s report(s) or nine months after the end of the fiscal year). Entities requiring an extension do not need to obtain prior approval for the extension, however, they should document the reasons for the delay and when completing the submission on the FAC website, they should make reference to the memorandum M-20-17.

Furthermore, the memorandums also include additional guidance on other matters such as allowability of costs not normally chargeable to awards, as well as rules surrounding procurement standards.

PPP and EIDL Loan Considerations

One of the most pressing questions as it pertains to Uniform Guidance and COVID-19 is whether or not the SBA Paycheck Protection Program (“PPP”) loans would be considered federal financial assistance for purposes of reporting on the Schedule of Expenditures of Federal Awards (“SEFA”).

The SBA provided some insight into these questions via its communications with the Governmental Audit Quality Center (“GAQC”), as outlined in the March 5, 2020 GAQC Alert No. 404, as follows:

  • PPP loans will not be subject to the Uniform Guidance Single Audit requirements, as the PPP loans were administered under the 7(a) guaranty loan program, and have been provided to organizations through local financial institutions. Accordingly, entities do not need to report the PPP loan proceeds on the SEFA.
  • Economic Injury Disaster Loans (“EIDLs”) will be subject to the Uniform Guidance Single Audit requirements, as they are considered to be a direct loan from the SBA. As such, entities expending more than $750,000 in federal funds, inclusive of the EIDL, must include the loan proceeds on the SEFA.

Although this guidance is helpful to both auditees and auditors alike, it should be noted that as of now there is still no formal guidance set forth by the OMB regarding its final interpretation on these programs.

Release of the 2020 Compliance Supplement Likely to be Delayed

On April 10, 2020, the GAQC wrote to the OMB to provide feedback on the inclusion of guidance relative to the COVID-19 pandemic in the 2020 Compliance Supplement. In this letter, the GAQC offered recommendations as to how the Compliance Supplement should be revised in order to address the impacts of COVID-19, including the potential future impacts on major program risk assessments, internal control testing, and sample sizes. The OMB has stated that its goal is to issue the Compliance Supplement by the end of June 2020, however, it appears likely that the release may be delayed due to the uncertainties surrounding COVID-19.

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