The single audit landscape is changing, thanks in large part to the uncertainties and changes brought on by COVID-19. From large quantities of relief funding triggering new compliance requirements to extensions of due dates, there’s much to consider when it comes to single audit requirements going forward.
In order to help organizations understand the changes related to single audits, the AICPA recently released a report on 2020 Single Audit Considerations. We’ve outlined key takeaways from that report below. Understanding how COVID-19 funds impact your audit is a great way to help your organization be prepared.
What is a single audit and why does it matter?
We recently broke down this key requirement and how it’s been impacted by COVID-19.
OMB Memo M-20-26
Several memos have been issued surrounding single audit and the impacts of COVID-19. One of particular note is OMB Memo M-20-26, Extension of Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations.
Key provisions of M-20-26 are as follows:
2020 Compliance Supplement
The 2020 Compliance Supplement will be issued in two parts. The first part was developed prior to COVID-19 and contains limited information related to the COVID-19 pandemic, including a summary of new COVID-19 programs. The second part of the Compliance Supplement will be an addendum that will address the new COVID-19 programs in detail and is expected to be issued in early fall.
2020 Planning Considerations
Completeness and accuracy of the SEFA is critical, and high-level personnel may need to be involved. Auditors should familiarize themselves with the new COVID-19-related programs and programs generated by the CARES Act.
Communication with the client during planning is critical. Discussion on remote working may be necessary and dialogue on how the client is addressing challenges with new CARES money is key.
New COVID-19 Programs
New COVID-19 programs may be a high-risk type A program because they have not been previously audited. There’s currently no requirement to assess type B COVID-19 programs as automatic high risk; however, auditors’ assessment will need to consider the newness of the program and other factors.
Existing Federal Programs Receiving Additional Funding
Programs assessed as type A should not be assessed as high risk solely due to COVID-19 funding. Type A programs would be changed to high risk if the auditor determines that changes in personnel or systems due to COVID-19 significantly increased program risk. For Type B programs, an auditor would need to consider whether the additional funding received increases risk.
Existing Federal Programs with Changed Compliance Requirements
Auditors will need to determine if a client’s existing programs have compliance requirements subject to audit that have been relaxed or revised for part of the year due to COVID-19. Auditors should have discussions with clients to determine how they have been monitoring for changes in requirements. For example, is someone at the client monitoring federal agency websites to determine if the agencies are adopting the OMB memos? Is someone monitoring agency FAQ documents? Auditors should check the Compliance Supplement addendum (when issued) to determine if it includes revised sections for existing programs.
2020 Single Audit Performance Considerations
Below are some considerations related to 2020 Single Audits.
Significant Federal Oversight Expected
Agencies are likely to perform direct engagements on recipients of COVID-19 funding. At this point, it’s unclear whether this will increase federal reviews of audit work.