On December 23, 2020, the Office of Management and Budget (OMB) released the long-anticipated Compliance Supplement Addendum, which contains information specific to several federal programs. These programs include COVID-19-related funding for both entirely new and existing programs updated in the four funding acts enacted during 2020 in response to the COVID-19 pandemic, including the CARES Act. The guidance is to be used in performing single audits and program-specific audits of these programs for years ending June 30, 2020, through June 29, 2021. Entities must use this guidance in conjunction with the 2020 Compliance Supplement that was initially released in August 2020.
You can find the complete compliance supplement separated by section here.
In addition to guidance directing auditors how to perform single audits of these funds, information regarding waivers of certain requirements, information on the presentation of funds and of donated PPE on the Schedule of Expenditures of Federal Awards (SEFA), and extensions to audit due dates are included in the addendum.
The addendum also includes information specific to Federal Funding Accountability and Transparency Act (FFATA) reporting. FFATA reporting, through the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS), is required when a prime recipient of a federal award makes first-tier subawards to subrecipients and when a prime contractor makes first-tier subcontracts to subcontractors. FFATA reporting becomes public information and is likely to be subject to scrutiny by federal awarding agencies and other regulators in the interest of maintaining transparency and accountability in the awarding of federal awards. In addition, the general public can search through the FFATA data reported through the FSRS.
The FFATA reporting requirement applies to all subawards of federal awards, not only those considered COVID-19 awards. Direct recipients and contractors involved in subawards and subcontracts of federal funding need to ensure that the prompt completion of reporting.
The addendum has provided clarity to the treatment of certain items on the SEFA. The reporting of expenditures of Provider Relief Fund awards and PPE presentation provided by federal awarding agencies are of particular interest.
The Provider Relief Fund included distributions to healthcare providers beginning in April 2020, including general distributions and various targeted distributions. The most up-to-date information about the Provider Relief Fund is available here. The addendum has clarified that no amounts related to the Provider Relief Fund will be presented on the SEFA for years ending prior to December 31, 2020. All expenditures related to the Provider Relief Fund for the calendar year ending December 31, 2020, will be reported to the Department of Health and Human Services in early 2021. Reporting on the SEFA will match the amounts reported, meaning that entities with fiscal years ending before December 31, 2020, will show no amounts for the Provider Relief Fund. Fiscal years ending after December 31, 2020, may include amounts spent in prior years on the SEFA.
For example, an entity with a fiscal year ended September 30, 2020, that spent $1,000,000 in the Provider Relief Fund by September 30, 2020, and an additional $500,000 in the Provider Relief Fund between September 30, 2020, and June 30, 2021, will show $0 on the September 30, 2020, SEFA and $1,500,000, including $1,000,000 in prior year expenditures, on the September 30, 2021, SEFA.
This adjustment will result in single audits of these funds being pushed off until later in 2021 to allow providers and auditors additional time to prepare. At the time of this article, the reporting portal is open for registration only, and full reporting is not yet possible. Providers should be alert for guidance from HHS related to the required reporting and the opening of the reporting portal. You can find the most up-to-date guidance here.
Throughout 2020, we have seen OMB and other federal awarding agencies allow for extensions of due dates and other administrative-burden relief items. The addendum includes information about currently active extensions to single audit due dates, including recipients and subrecipients that received COVID-19 funding with original due dates from October 1, 2020, through June 30, 2021. This update provides an extension for up to three months beyond the standard due date. It also includes details on how recipients of donated PPE and entities that donated PPE to other organizations should present these amounts on the SEFA.
Usually, federal aid provided in the form of non-cash assistance is presented as federal awards expended in the SEFA and is included in determining whether an entity is subject to the single audit and determining significant programs for the single audit. For example, this aid could consist of food items donated to schools providing federally subsidized meals to students. However, the addendum states that the fair market value of PPE donated in response to the COVID-19 pandemic shall be reported in a note disclosure to the SEFA and will not be included in determining whether a single audit is required or in the determination of significant programs. This guidance is welcome news, as valuing and tracking such donations of PPE that were made during a hectic and busy time could prove problematic.
The addendum contains information on a number of programs affected by COVID-19. If any of these programs impact your organization, it crucial to stay current on the latest information. If you have any questions, please reach out to your CRI professional with any questions!