Complying With Federal Requirements for COVID-19 Funding in Your Single Audit

By John D'Amico  |  February 25, 2021

COVID-19 has greatly impacted the U.S. economy, resulting in a complete shutdown of many businesses and nonprofit organizations when the pandemic started. The impact is continuing as many of those businesses are still closed and/or operating at limited capacity to help stop the spread of COVID-19.

The federal government responded to this crisis by providing financial assistance in the form of “federal awards,” which are subject to a Single Audit. Federal awards include direct awards from a federal agency and federal funds passed through to an entity from a state or local government or from another nonprofit.

Nonprofits and state and local governments are subject to a federal Single Audit if they expend $750,000 of federal financial assistance or more in their fiscal year. This includes COVID-19 assistance either in grants or loans and all their other non-COVID-19 federal financial assistance expended in their fiscal year. Loans obtained under the Paycheck Protection Program (PPP) are not subject to a Single Audit.

OMB Compliance Supplement

The guidance and requirements that auditors must follow to perform Single Audits are included in the U.S. Office of Management and Budget’s Compliance Supplement (the “Supplement’). Although the Supplement is written for auditors, it is also a very good resource for organizations that received and expended federal awards. The Supplement has very helpful information to assist recipients of federal grants with the regulations and requirements of the federal program. So why not know ahead of time what your auditors will be looking for and testing? It is like getting the answer key before taking the test!

The Supplement is an annual document and the latest one was issued in August 2020 without the COVID-19 federal awards. An Addendum was issued in December 2020 relating to COVID-19 funding.

Federal awards have a specific Catalog of Federal Domestic Assistance (CFDA) number. CFDA numbers are the system for identifying and sorting the 2,000 plus federal programs. Each CFDA number contains five digits and appears in the following format: ##.### (e.g. 10.001). The first two digits signify the federal agency. Auditors will be testing your compliance with the federal rules and regulations based upon the CFDA number of the federal program. Not all federal programs are included in the Supplement, but many of the largest and more common federal programs are included. The Supplement includes specific audit programs for numerous federal programs that auditors must use to perform their Single Audits tests. It details the audit objectives and suggested audit procedures that the auditor should perform.

The Supplement consists of seven parts and nine appendices. The seven parts of the Supplement are:

• Part 1 – Background, Purpose and Applicability. This part contains general Single Audit information.

• Part 2 – Matrix of Compliance Requirements. Part 2 identifies which of the 12 types of compliance requirements are subject to audit for the federal programs included in this supplement.

• Part 3 – Compliance Requirements. Part 3 includes the generic program objectives and audit procedures pertaining to the 12 types of compliance requirements.

• Part 4 – Agency Program Requirements. Part 4 contains the specific program objectives and procedures by federal agency and CFDA number. When any of these five types of compliance requirements are applicable to a program (Activities Allowed or Unallowed; Eligibility; Matching, Level of Effort, Earmarking; Reporting; and Special tests and Provisions), Part 4 will always provide information specific to the program. The other seven types of requirements are not specific to a program and therefore not included again in Part 4 as they are in Part 3.

• Part 5 – Clusters of Programs. Part 5 identifies those programs that are to be considered clusters of federal programs.

• Part 6 – Internal Control. Part 6 describes characteristics of internal control relating to each of the five components of internal control.

• Part 7 – Guidance for Auditing Programs Not Included in This Compliance Supplement. Part 7 states that for those programs not covered in the Supplement, the auditor must use the 12 types of compliance requirements described in Part 3.

The Single Audit compliance requirements are grouped into the following 12 areas:

Activities Allowed or Unallowed – These are the activities that the federal program has determined the funds can be used for or cannot be used for. Since this is very specific to each federal program, it is therefore included in the audit program in Part 4.

Allowable Costs - This describes the types of costs that can be charged to a federal program. Generally, only necessary and reasonable costs can be charged to a federal program. There are, however, certain costs that are not allowed to be charged to a federal program such as fines, penalties, bad debt, tobacco and alcohol. Since this requirement is for all federal programs, it is included once in Part 3. Part 3B of the Supplement has an extensive list of selected items of cost and whether they are unallowable, allowable or allowable with restrictions.

Cash Management – Most federal programs are either funded on a reimbursement basis, advances or a combination of both. For advances, the organization must minimize the time elapsing between the receipt of the funds and the disbursements. For reimbursements, the organization must pay for the program costs with their own funds prior to requesting reimbursement. Since this requirement is for all federal programs, it is included once in Part 3. See Part 3C for the requirements.

Eligibility – This relates to beneficiary eligibility, not organizational eligibility. The specific requirements for eligibility are unique to each federal program. See the eligibility requirements for your federal program in Part 4.

Equipment and Real Property Management – This requirement only applies if equipment or real property is purchased with federal grant funds of over $5,000 or more, or over the organization’s capitalization policy. Since this requirement is for all federal programs, it is included once in Part 3. See Part 3F for the requirements.

Matching, Level of Effort, Earmarking – The specific requirements for these are unique to each federal program. See the specific requirements for your federal program in Part 4.

Period of Performance - Federal grants may specify a time period during which the organization may use the federal funds. Where a funding period is specified, the organization may charge to the award only costs resulting from obligations incurred during the funding period and any pre-awards authorized by the federal awarding agency. See Part 3H for the requirements.

Procurement, Suspension and Debarment- Organizations must use their own documented procurement procedures, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in Uniform Guidance as set out in Title 2 CFR sections 200.318 through 200.326.

Organizations are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” includes contracts awarded under a grant or cooperative agreement that are expected to equal or exceed $25,000. All non-procurement transactions entered into by a pass-through entity, irrespective of award amount, are considered covered transactions. See Part 3I for full details. Since this requirement is for all federal programs, it is included once in Part 3. See Part 3I for the requirements.

Program Income – Program income is the gross income earned by an organization that is directly generated by a supported activity or earned as a result of the federal award. It is generally fees charged to participants in the federal program. It can also be interest earned on loans made with federal award funds. Program income does not include interest earned on advances of federal funds or the proceeds from the sale of equipment or real property acquired with federal funds. Since this requirement is for all federal programs, it is included once in Part 3. See Part 3J for full details.

Reporting – This requirement relates to the reporting required to the federal agency or to the pass-through agency. It includes financial reporting (requests for advances or reimbursements), performance and special reporting. The specific requirements for reporting are unique to each federal program. See the reporting requirements for your federal program in Part 4.

Subrecipient Monitoring - This requirement is applicable if an organization passes the federal funds through to another organization that will be running the federal program on their behalf. The organization that passes through the funds must identify the award and applicable requirements to the other entity, evaluate the risk of their noncompliance and monitor their activities. Since this requirement is for all federal programs, it is included once in Part 3. See Part 3M for full details.

Special Tests and Provisions – The specific requirements for Special Tests and Provisions are unique to each federal program. See the specific requirements for your federal program in Part 4.

Compliance Supplement Addendum

The Compliance Supplement Addendum (‘the Addendum”) was issued in December 2020 and must be used in conjunction with the 2020 Compliance Supplement. It is effective for all Single Audits for organizations that have fiscal year-ends ending on June 30, 2020 and thereafter.

The COVID-19 awards are funded under the following Acts:

• Coronavirus Aid, Relief and Economic Security Act (CARES)

• Coronavirus Preparedness and Response Supplemental Appropriations Act

• Families First Coronavirus Response Act

• Paycheck Protection Program (PPP) and Health Care Enhancement Act (PPP loans are not subject to a Single Audit)

COVID-19-federal awards that are subject to a Single Audit and in the Addendum:

Program Name	CFDA #
Provider Relief Fund (PRF)	93.498
Uninsured Testing Portal	93.461
Coordinated Services and Access to Research For Women, Infants, Children, and Youth (HRSA)	93.153
HIV Emergency Relief Project Grants	93.914
HIV Care Formula Grants	93.917
Grants to Provide Outpatient Early Intervention Services	93.918
Coronavirus Relief Fund (CRF)	21.019
Education Stabilization Fund	84.425-ESF
HEERF Education Stabilization Fund	84.425- HEERF
Coronavirus Emergency Supplemental Funding Program	16.034
Indian Community Development Block Grant	14.862
Telehealth Program	32.006

COVID-19 federal awards that are not in the Addendum:

Program Name	CFDA #
Disaster Assistance Loans	59.008  *
Cares Act Project SERV	84.184c *
Coronavirus Food Assistance Program (CFAP)	10.130  *
Rural Health Clinic Testing	93.697  *
Community Development Block Grant (CDBG)	14.218  **
Emergency Solutions Grant, Homelessness	14.231  **

*Use Part 7 of the 2020 Supplement to develop audit approach
** Use the specific audit program included in the 2020 Supplement Part 4

Also, additional COVID-19 funding can be added to existing federal awards by a pass-through entity such as a state or local government.

The Addendum is structured the same as the Supplement and needs to be used in conjunction with it. The Part 2 matrix includes the 12 compliance requirements subject to audit for each of the COVID-19 programs included. Part 4 has the audit programs for each of the COVID-19 programs. Auditors and auditees should start with Part 2, find their program to determine which of the 12 requirements is subject to audit and then use Part 4 for the specific requirement and Part 3 for the generic requirements.

Reporting Compliance Requirement

If the compliance requirement “Reporting” is subject to audit, then you must use the reporting requirements in both the Supplement and the Addendum. The Addendum has an additional reporting requirement related to the Federal Funding Accountability and Transparency Act (FFATA). This Act requires direct recipients of federal awards who make subawards of $25,000 or more to register in the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) and report subaward data through FSRS. Information input to FSRS is available at USASpending.gov
(https://www.usaspending.gov/search).

Waivers and Changes

The Addendum includes information regarding U.S. Department of Agriculture (USDA) programs impacted by COVID-19 waivers. Because of the exceptional circumstances of this public health emergency, the USDA granted waivers for several of their programs to ease operations at the state and local levels and minimize the potential exposure to COVID-19 (see https://www.fns.usda.gov/ disaster/pandemic/covid-19).

The Addendum also includes U.S. Department of Education (DOE) waivers and changes to the 2020 supplement for the Student Financial Aid cluster (see fsaconferences.ed.gov/2020buffer.html). DOE also developed a comprehensive website for COVID-19 issues that will affect the audits of the Student Financial Aid cluster and can be found at https://www.ed.gov/coronavirus?src=feature.

Provider Relief Fund

Included in Part 4 of the Addendum is the audit program for the Provider Relief Fund (PRF) program 93.498. The Addendum states that for fiscal years ending in 2020 on or before December 30, 2020, organizations should not include the PRF expenditures on their Schedule of Expenditures of Federal Awards (SEFA) and therefore not be included for purposes of determining the threshold for a Single Audit or determining the Type A/B program threshold for major program determination. Starting with the entity’s fiscal year-end December 31, 2020, the expenditures for PRF must be included on the entity’s SEFA and are subject to a Single Audit.

Donated Personal Protective Equipment

Since donated personal protective equipment (PPE) was mostly provided without any compliance,  reporting requirements or assistance listing (CFDA numbers), non-federal entities that received donated PPE should not include the value received on their SEFA and therefore not be included for purposes of determining the threshold for a Single Audit or determining the Type A/B program threshold for major program determination. The non-federal entities that received donated PPE should provide the fair market value of the PPE at the time of receipt as a stand-alone footnote accompanying their SEFA. Because donated PPE has no bearing on the Single Audit, the donated PPE footnote may be marked “unaudited.”

Single Audit Due Dates

Normally Single Audits are due nine months after an organization’s fiscal year-end or 30 days after issuance of the Single Audit report, whichever comes first. Due to the late issuance of audit guidance for the COVID-19 programs, the Single Audit due dates have been extended by three months beyond the normal due dates if the entity had expenditures of COVID-19 funding. The extension is for original due dates between October 1, 2020 and June 31, 2021. For example, a Single Audit for an organization with a fiscal year-end of June 30, 2020 would normally be due on March 31, 2021 but are now due by June 20, 2021.

Proper Presentation of COVID-19 Funding on the SEFA and the Data Collection Form

Expenditures of COVID-19 funding on an organization’s SEFA must specifically indicate “COVID-19” in the name of the federal program such as:

“COVID-19 – Coronavirus Relief Fund”

21.019

$x,xxx,xxx

For COVID-19 funding that was added to an existing federal program such as Temporary Assistance to Needy Families (TANF), the COVID-19 funding should be on its own line as follows:

COVID-19 – Temporary Assistance for Needy Families	93.558	$x,xxx,xxx
Temporary Assistance for Needy Families	93.558 -	$x,xxx,xxx
Total – Temporary Assistance for Needy Families	93.558	$x,xxx,xx

On the Data Collection Form, the COVID-19 expenditures need to be on a separate row by CFDA number with “COVID-19” included in the additional award identification column.

Conclusion

The Supplement is required to be utilized by auditors to perform their Single Audits along with the Addendum for COVID-19 funded programs. Recipients of federally funded programs should also utilize the Supplement and Addendum to understand and comply with those requirements to help ensure that they will be in compliance with these requirements if they are audited.

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