By Anthony O. Otaigbe, CPA
Unfortunately, the Financial Accounting Standards Board (FASB) Accounting Standards Codification is virtually mum about contracts between government agencies and for-profit entities. According to subpart F part 200 of the Office of Management and Budget (OMB) Uniform Guidance (aka CFR):
“A Non-Federal entity that expends $750,000 or more during the non-Federal entity's fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part.”
In June 2020, the OMB published memorandum M 20-26 stating that “payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.”
In other words, funds received via PPP loans are not eligible costs under federal awards.
Summary of coronavirus relief funding subject to single audit
In December 2020, the OMB released an addendum to its 2020 Compliance Supplement. According to Addendum 93.498, hospitals and other health care providers are required to list eligible expenditures in the Schedule of Expenditures of Federal Awards. The funding will be evaluated for its compliance to Subparts B, D and E.
Addendum 21.019 states that the Uniform Guidance will apply to funds received from the Coronavirus Relief Fund, which was established to provide direct payments to state, territorial, tribal, and certain eligible local governments to cover necessary expenditures incurred due to the public health emergency brought on by COVID-19. The funding will be evaluated for its compliance to Subpart D Sections 200.303-200.332.
Addendum 84.425 indicates that the Uniform Guidance will be applied towards funds used in connection with the Education Stabilization Fund (ESF). The ESF is composed of three funds. First, the Governor’s Emergency Education Relief (GEER) allocates funds to governors to allot to local education agencies, state institutions of higher education, and other education institutions within the state. Second, the Elementary and Secondary School Emergency Relief Fund (ESSR) is awarded to states to provide funding to local educational agencies. Lastly, 90% of the appropriations for the Higher Education Emergency Relief Fund (HEERF) are awarded directly to institutions of higher education. Specifically, Subparts B, C, D and E will apply.
Funds used in association with the Coronavirus Food Assistance Program (CFAP) will not be subject to the Uniform Guidance. The Coronavirus Emergency Supplemental Funding Program was also included in the OMB addendum to the 2020 Compliance Supplement. This fund provides assistance to state and local governments and tribes. Subparts B, C, D and E will apply.
The Coronavirus Relief — Pandemic Relief for Aviation Workers was not included in the addendum. Funds used in association with The Emergency Rental Assistance Program are subject to the Uniform Guidance Subparts B, C, D and E. This program provides funding to states, U.S. territories, local governments, and Indian tribes to assist households that cannot afford rent and utilities due to the COVID-19 pandemic.
The OMB and the U.S. Treasury department jointly confirmed that the Employee Retention Credit program is not subject to the single audit. The COVID-19 Telehealth Program is included in the Addendum as subsection 32.006. Expenditures used in connection with this fund will be evaluated based on Subparts B and E. This program was established to assist health care entities provide telehealth services.
Expenditures used in connection with the Economic Injury Disaster Loan Emergency Advance are not subject to single audit, however the disaster assistance loans will be subject to the Uniform Guidance. While it is clear that subpart F will be used to evaluate funds used in connection with this program, the AICPA’s Government Audit Quality Center has made an inquiry with the SBA regarding the relevance of Subparts B–E.
The Office of Entrepreneurial Development Resource Training Portal will not be subject to the Uniform Guidance, but the Shuttered Venue Operations Grant Program will. Expenditures will be evaluated for their compliance to Subparts B, C, D and E. This grant was established to assist shuttered venues, theaters and museums.
Recipients of Education Stability funds were asked to exhaust those funds first and maintain CARES Act Project Serv (School Emergency Response to Violence) funds in reserves.
The Uniform Guidance also applies to expenditures in connection with the COVID-19 Testing for the Uninsured program, which provides claims reimbursements to health care providers for conducting testing and treatment for uninsured individuals. Additionally, the Uniform Guidance will apply to the Grants for New and Expanded Services under the Health Center Program. Specifically, the expenditures will be evaluated based on their compliance to Subparts B, C, D and E and part 7, since the program was not added to the Addendum. COVID-19 Testing for Rural Clinics was not added to the Addendum but will be subject to the Uniform Guidance. This program provides funding for COVID-19 testing in rural areas. The expenditures used in connection with this program will be evaluated based on their compliance to Subparts B, C, D and E and part 7 since the program was not added to the Addendum.
The Emergency Grants to Address Mental and Substance Use Disorders was not included in the OMB’s addendum. This program assists states, territories and tribes with providing increased mental and substance use disorder services. The expenditures used in connection with this program will be evaluated based on their compliance to Subparts B, C, D and E and part 7, as the program was not added to the Addendum.
It is important to note that the addendum and related coronavirus relief programs were all recently legislated during a state of malaise brought on by ever-changing events caused by the pandemic. To date, several funds such as the EIDL, PPP, and others have been reopened in efforts to help protect the public.
Since COVID-19 has not yet been fully neutralized globally and new strands are appearing, we should continue to review authoritative sources such as the AICPA’s Government Audit Quality Center, OMB guidance memoranda and Small Business Administration updates.
Anthony O. Otaigbe, CPA, is a principal member of The Otaigbe Group, in Manassas. The Otaigbe Group specializes in public, nonprofit, internal and forensic audit. Anthony also teaches accounting and business courses as an adjunct professor.