New information regarding the reporting requirements for the Coronavirus Aid, Relief, and Economic Security (CARES) Act Provider Relief Fund continues to emerge. The most recent news published by the Department of Health and Human Services (HHS) states the Provider Relief Fund payments will be subject to a single audit or program-specific audit. Both non-federal entities (e.g. non-profits) and for-profit entities are included in this determination. Entities that have never before been subject to such an audit may now be required to have one.
What’s the difference between a single audit and a program-specific audit?
A single audit is not new to non-federal entities that expend $750,000 or more annually in total federal awards. The decision by HHS means that the Provider Relief Funds now have to be included in the determination of whether the $750,000 threshold is met.
A single audit is essentially comprised of two parts:
The audit must be performed by an independent auditor with the appropriate qualifications to complete an audit in accordance with Government Auditing Standards (GAS). In addition to a “normal” independent audit, GAS includes consideration of internal controls over financial reporting, as well as testing of compliance with laws and regulations applicable to the major federal programs.
A program-specific audit is an audit of a program’s financial statements and the entity’s compliance with an individual federal program (in this case the Provider Relief funds). This type of audit is allowed when the entity expends federal awards under only one federal program and the terms and conditions of the federal award do not require an entity-wide financial statement audit.
For-profit entities that expend $750,000 of more of Provider Relief Funds during the entity’s fiscal year will be subject to an audit as described in 45 Code of Federal Regulations (CFR) Section 75.216. Under this section, there are two options for audits:
Further information regarding best practices for how auditors will perform these for-profit engagements is expected.
It’s important to note that, for both types of entities, the $750,000 threshold is based on funds expended and not funds received.
What can you do now to prepare for a potential audit?
We expect further guidance later in Fall 2020. Until then, there are some things that you can do to prepare in the event that you will be subject to an audit as described above:
For more information on single audits, the American Institute of CPAs (AICPA) has a resource center for entities that are or may be subject to a single audit:
Other resources are available from the Office of Management and Budget:
https://www.whitehouse.gov/omb/management/office-federal-financial-management/. Here you will find the Compliance Supplement, which is the roadmap that auditors follow when performing a single audit.
To discuss how we can help, contact Sam Phillips at , or your Kerkering Barberio team member at (941) 365-4617 or visit our website at https://www.kbgrp.com/resources/covid-19-updates.
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