We’ve seen historic levels of federal funding in response to the COVID-19 pandemic. Legislation such as the CARES Act and the recent American Rescue Plan Act of 2021 (ARPA) provided billions of dollars to American businesses, state and local governments and not-for-profits. While this funding has been a huge relief, especially for nonprofits, it causes complications for a lot of recipients.
When a non-federal entity expends $750,000 or more of federal awards in a fiscal year, a single audit is required. While not all CARES Act recipients need a single audit and we don’t know the single audit ramifications of ARPA, here is a nonauthoritative list of the new programsthat require single audits. Plus, many existing federal programs received significant new funding that will be subject to single audit.
Many COVID relief fund recipients have never had a single audit before and may not know all the requirements associated with this type of funding. Your existing clients may need a single audit for the first time. You may begin working with new clients who have never had a financial statement audit before. Here are a few tips for how you can help your clients through the single audit process.
Ask clients what funding they’ve received.
At my firm, we’re asking all our clients what type of funding they’ve received in the past year. In some cases, we’ve asked to see a copy of their grant agreements so we can help them identify what’s needed on their end, and then on our end as the auditor. Additionally, we send emails to clients with news related to the funding they’ve received. We also update our website with the most current information. The sooner our clients know about important and relevant information, the better prepared they are and the better audit we can perform — so it’s a win-win.
Encourage your clients to be proactive and ask any questions about funding they’ve received. For example, the controller at one of my clients, the North Carolina Aquarium Society, let me know once she learned her organization would receive relief funding. She knew this funding had stipulations but didn’t know yet that a single audit would be required. She found out about the single audit early in the process. But so many other organizations were unaware of all the requirements until after they had already received these funds.
Communicate openly with your clients.
This is a time when you need to have heightened communication with your clients. My firm has found that our clients have a lot of different interpretations of the funding guidelines. As an auditor, you should clarify that your clients truly understand the guidelines for the type of funding they received and make sure they have procedures in place to comply.
Some of the COVID funding programs, such as the Paycheck Protection Program, do not require a single audit. But clients need to know — even if they’re under the $750,000 threshold — that there are still administrative requirements even if a single audit is not needed. For instance, the funds may be restricted for certain purposes, so make sure your clients fully understand the guidelines for the funds they have received.
Be aware of audit quality concerns.
Some first-time single audit clients may be concerned with costs. They’re required to get an additional audit, which will require more work and will cost more than other audits they may have received in the past. Some clients may worry about spending too much on the audit. But, in this situation, they need to make sure they’re getting the highest-quality audit possible.
As auditors, we have a duty to the public to perform high-quality audits. The public relies on trusted audited information to ensure their tax dollars are spent appropriately. Because of this, audit quality should always be at the forefront on every auditor’s mind.
Because of the complexity of single audits and the specialized knowledge needed on the rules and compliance requirements, if you are an auditor who doesn’t perform them, you should Consider whether you should even accept a single audit engagement. You can still perform the financial statement audit, but other options for the single audit might be to refer your clients to someone else in your organization with the appropriate experience or to another firm that specializes in single audits. Alternatively, if you have some experience but not much, you could consider engaging another firm to perform a pre-issuance review or other types of consultative assistance to help ensure a high-quality audit. You can use the AICPA’s Peer Reviewer Search tool to find an auditor to refer your clients to or to look for consultative assistance. Additionally, the GAQC has a listing of its member firms with contact information on its Find A Member page.
If you choose to take on a single audit, there is learning available to help you gain the fundamental knowledge you need.
Make time for continuing education.
Lifelong learning is a large part of the accounting profession. My firm has always been big on training and CPE, so we’re making sure that all of our staff gets the required training for their specialization areas. (For instance, as generally accepted government auditing standards (GAGAS) require, auditors who perform single audits must maintain their competency through CPE hours and topics listed in the 2018 Yellow Book.)
Regarding the new funding in the past year, we pay close attention to any sort of training that federal agencies provide. Additionally, the information we get from AICPA’s GAQC, in particular its COVID-19 Resource page, has been great. I’d also suggest talking to other firms on what resources they may have regarding single audits and COVID relief funds. It’s useful to speak to your peers about what they’re doing and learn from their experiences.
The pandemic has drastically changed work in many industries, and the accounting profession is no different. My firm has performed more single audits this year, and this is likely happening at other public accounting firms across the country.
Keeping up with all these changes while continuously striving to be that trusted adviser for your clients is tough. In these times, it’s especially important to be mindful of staff well-being. Organizations need to provide support to the staff to help them remain engaged and avoid burnout. Focusing on well-being can enable staff to do their jobs better, which allows them to better serve their clients and, ultimately, contributes to enhancing audit quality.