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WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTINGInvestment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor

Single Audit Update- Improving Federal Grant Compliance

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DisclaimersThe information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by CliftonLarsonAllen LLP to the user. The user also is cautioned that this material may not be applicable to, or suitable for, the user’s specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The user should contact his or her CliftonLarsonAllen LLP or other tax professional prior to taking any action based upon this information. CliftonLarsonAllen LLP assumes no obligation to inform the user of any changes in tax laws or other factors that could affect the information contained herein.

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Learning ObjectivesAt the end of this session you will be able to:Describe best practices and changes related to fiscal year 20 Uniform Grant audits:• Discuss recent changes with Uniform Grant Guidance.• Review relevant changes from the CARES, FFCRA and ARPA.• Discuss internal controls, testing processes, and best

practices.

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Compliance Supplement Addendum• New Programs

– CFDA 14.862 Indian Community Development Block Grant Program– CFDA 16.034 Coronavirus Emergency Supplemental Funding– CFDA 20.218 Motor Carrier Safety Assistance Program– CFDA 21.019 Coronavirus Relief Fund– CFDA 32.006 COVID-19 Telehealth Program– CFDA 84.425 ESF Education Stabilization Fund Under the Coronavirus Aid, Relief, and Economic Security Act – CFDA 84.425 HEERF Education Stabilization Fund Under the Coronavirus Aid, Relief, and Economic Security Act Higher Education

Emergency Relief Fund – CFDA 93.153 Coordinated Services and Access to Research for Women, Infants, Children, and Youth (Ryan White HIV/AIDS Program

Part D Women, Infants, Children, and Youth WICY Program) – CFDA 93.461 COVID-19 Testing for the Uninsured – CFDA 93.498 Provider Relief Fund – CFDA 93.914 HIV Emergency Relief Project Grants (Ryan White HIV/AIDS)– CFDA 93.917 HIV Care Formula Grants (Ryan White HIV/AIDS Program Part B) CFDA 93.918 Grants to Provide Outpatient Early

Intervention Services with Respect to HIV Disease (Ryan White HIV/AIDS Program Part C) Program Part A) – Many Existing Programs that received additional COVID-19 Funding

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Audit Extensions• The previous OMB memos (M-20-17, M-20-26,etc.)

have expired but…….• The 2020 Compliance supplement granted a 3-

month extension linked to COVID 19 funding but…..• March 19th OMB M-21-20 memo allows recipients

and subrecipients that have fiscal year-ends through June 30, 2021 a 6-month extension

– No requirement for recipients/subrecipients to request approval

– If utilized, must maintain documentation for the reason for the delay in filing

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SEFA and Related Notes• Donated PPE (from a federal source) should be disclosed in

the notes to the SEFA (may be marked as unaudited).• COVID-19 programs should be identified on the SEFA• SEFA Questions

– Award Date– Periods of Performance before award date – Costs incurred– Costs applied to award– Lost revenue– Subsidiary level Reporting(component units)

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Major Program Determination• New COVID 19 Program impact on program selection

– Significant addition of funding alone does not result in automatic high risk Designation

– However large influx of dollars are increasing Thresholds, resulting in limited amount of Type A Program

– Type B factors are still appliable◊ Audit experience◊ Weaknesses in internal control over federal programs◊ Prior audit findings◊ Note recently audited as major◊ Oversight exercised by federal agencies and pass through entities◊ Inherent risk

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Impact of Fraud• Social Engineering• Program Fraud

• Unemployment• Paycheck protection program• Business Grants/loans

• Service Providers• Interruption of services/telework• Funding pressures

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Impact on Internal Controls• Reevaluate Risk

– Physical/logical access– New programs– New risk as a result of changes

• Reassess internal control environment– Reliance on automated controls

• Strengthen segregation of duties– Process documentation

• Document Key Areas

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Audit feedback :Subrecipient vs. Contractor (Vendor)Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity:

– Determines who is eligible to receive what Federal assistance;– Has its performance measured in relation to whether objectives of a Federal program were

met;– Has responsibility for programmatic decision making;– Is responsible for adherence to applicable Federal program requirements specified in the

Federal award; and– In accordance with its agreement, uses the Federal funds to carry out a program for a public

purpose specified in authorizing statute, as opposed to providing goods or services

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Audit feedback: Subrecipient vs. Contractor (Vendor)Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity's own use and creates a procurement relationship with the contractor. Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the non-Federal entity receiving the Federal funds:

– Provides the goods and services within normal business operations;– Provides similar goods or services to many different purchasers;– Normally operates in a competitive environment;– Provides goods or services that are ancillary to the operation of the Federal program; and– Is not subject to compliance requirements of the Federal program as a result of the

agreement, though similar requirements may apply for other reasons.

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Audit feedback: Subrecipient Monitoring: Awardee’s Responsibility – Risk Assessment

Evaluate and document each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring procedures. Consider such factors as:

– The subrecipient's prior experience with the same or similar subawards;– The results of previous audits including whether or not the subrecipient receives a single audit in

accordance with Subpart F—Audit Requirements of and the extent to which the same or similar subaward has been audited as a major program.

– Whether the subrecipient has new personnel or new or substantially changed systems; and– The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives

Federal awards directly from a Federal awarding agency).Pandemic impact on monitoring

– Reduction in workforce, retirements, leave, etc.– Budget

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Uniform Guidance Update

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Background• OMB must review the UG every 5 years (2 CFR 200.109)

– First 5 year Review resulted in Aug 2020 Federal Register Update which is effective November 12, 2020

◊ 2 CFR Part 25 – Universal Identifier and System for Award Management ◊ 2 CFR Part 170 – Reporting Subaward and Executive Compensation

Information ◊ 2 CFR Part 183 – Never Contract with the Enemy (new part added) ◊ 2 CFR 200 – Uniform Administrative Requirements, Cost Principles, and Audit

Requirements for Federal Awards (also referred to as the Uniform Guidance)

– Each Federal Agency must take action to adopt the guidance (TBD)

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Implementation Resources

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2 CFR Part 25 and 170• Key Changes 2 CFR Part 25

– Part 25 applies to Federal awarding agencies– Unique entity identifier as a universal identifier for Federal financial assistance

applicants, as well as recipients and their direct subrecipients– SAM is the repository for the information– Establish requirements for recipients to ensure subrecipients have a unique entity

identifier– Subrecipients are not required to obtain an active SAM registration, but must obtain a

unique entity identifier• Key Changes 2 CFR Part 170

– Part 175 provides guidance on requirements for recipients reporting of information on subawards and executive total compensation (FFATA)

◊ FFATA testing is back!!

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2 CFR Part 200 Subpart C, Pre-Federal Award Requirement and Content • Key Changes that must be included in award documentation

– Federal award performance goals◊ Performance goals, indicators, targets, and baseline data must be included in the federal

award, where applicable. The federal awarding agency must also specify how performance will be assessed in the terms and conditions of the federal award, including the timing and scope of expected performance

– General federal award information ◊ Budget period start and end date ◊ Total approved cost sharing or matching, where applicable ◊ Revised total amount of federal award to include approved cost sharing or matching

– General terms and conditions ◊ Future budget periods◊ Termination provisions

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2 CFR Part 200 Subpart D, Post Federal Award Requirement (Procurement)

• Key Changes– §200.317 Procurement by states

◊ Updated references for state to comply with to include 200.321 and 200.323 in addition to 200.322 (the new Domestic preferences for procurements provision);

◊ Revised to state that all other non-federal entities, including subrecipients, must follow the procurement standards in 200.318-200.327

◊ §200.320 Methods of procurement to be followed • Raised micro-purchase threshold from $3,500 to $10,000 • Raised SAT from $150,000 to $250,000 • Entity may request micro-threshold greater than $10,000 • Increases to $50,000 – self-selection – micro-purchase • Grouped procurement methods into three categories: informal, formal and non-competitive

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2 CFR Part 200 Subpart D, Post Federal Award Requirement (PTE)• Key Changes

– §200.301 Performance Measurement- requires federal agencies to provide recipients with clear performance goals, indicators, and milestones

– §200.332 - Requirements for pass-through entities ◊ Revises information required to be included in subaward to include the subaward

budget period end date in addition to the budget period start date ◊ PTEs are responsible for addressing audit findings related to their subaward ◊ PTEs are to use the subrecipients NICRA.

• If NICRA doesn’t exist, the PTE must determine an appropriate rate through either negotiation of a rate or use of the de minimis rate

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2 CFR Part 200 Subpart E, Cost Principles• Key Changes

– §200.431 Compensation – fringe benefits – for pension plan costs – revised allowable costs to provide an exception for state and local governments that the cost be determined in accordance with GAAP

– §200.449 Interest – replaced capital lease with “a lease contract that transfers ownership by the end of the contract”

– §200.465 Rental costs of real property and equipment – revised capital leases to “leases accounted for as a financed purchase under GASB or a finance lease under FASB”

– §200.471 Telecommunication costs and video surveillance costs – new section added to discuss this area (previously discussed)

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Families First Coronavirus Response Act

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Families First Coronavirus Response Act (FFCRA)• Employment provisions to expand eligibility for Family and

Medical Leave Act (FMLA) leave and to make emergency paid sick leave available until 12/31/20

• Public sectors employers prohibited from eligible tax credits• ARP extended the availability of the credit but did not extend

paid leave (tax exempt organizations)

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The American Rescue Plan Act of 2021 (“ARP”): Overview for Governments

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CARES Act Related Governmental Funding

YOUR TITLE 02

FEMAPublic Assistance Grants

TRANSPORTATION$25 billion for COVID-19 related operating and capital costs are eligible.

JUSTICE$850 million for the Coronavirus Emergency Supplemental Funding (CESF) grant program to assist state and local law enforcement and jails prevent, prepare for, and respond to COVID-19.

FEDERAL AVIATION ADMINISTRATION$9.9 billion in total available to commercial airports through the Airport Improvement Program (AIP).$9.4 billion for airports to prevent, prepare for, and respond to COVID-19.

RELIEF FUND$150 billion in direct aid specifically for COVID-

19 related expenses to states, tribal governments, and others with population

greater than 500,000 people.

FEDERAL RESERVE MUNICIPAL LIQUIDITY FACILITY

The Federal Reserve will purchase up to $500 billion of short term notes directly

from U.S. states, counties and cities.

EDUCATION$30 billion to be distributed to entities

providing education services.

CENTERS FOR DISEASE CONTROL

$1.5 billion for the (CDC) State and Local Preparedness Grants.

$100 billion to reimburse eligible health care providers for health care related expenses.

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Use of Funds Under Title VI, CRF – The CARES Act

Costs are necessary expenditures incurred due to the public health emergency with respect to the

Coronavirus Disease 2019 (COVID–19)

Cost were not accounted for in the budget most recently approved as of March 27, 2020 for the

State or government

Cost were incurred during the period that begins on March 1, 2020, and ends on December 30, 2021

Governments shall use the funds to cover only those costs of the state, tribal government, or unit

of local government that meeting all three (3) requirements.

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Overview of the American Rescue Plan Act• Signed into law March 11, 2021• $1.9 trillion total package, of which $360 billion in aid for

state and local governments, and another ~$300+ billion in additional funding for education, rental and housing assistance and transit areas

• Time period for funds available for most programs under ARP is longer than the CARES Act, example: Coronavirus State and Local Fiscal Recovery Funds through 12/31/2024

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Overview of the American Rescue Plan ActCoronavirus State Fiscal

Recovery Fund (Sec. 602) • $195.3 billion for the 50 States and

Washington DC • $20 billion for Tribal governments

Coronavirus Local Fiscal Recovery Fund Sec. (Sec. 603)

• $130.2 billion for local govts. (metropolitan cities: $45.57B, nonentitlement units of local

government: $19.53B, and counties: $65.1B)

Coronavirus Capital Projects Fund (Sec. 604)

• $10B to States, territories and Tribal governments

Emergency Rental Assistance ($21.55B) (Sec. 3201 )

• $18.6B allocated to States, territories, counties and cities for emergency

rental and utility assistance

Emergency Housing Vouchers ($5B) (Sec. 3202)

• Sec. 3205 Homelessness Assistance and Supportive Services Program

Homeowner Assistance Fund ($10B) (Sec. 3206

• For States, territories and Tribes for ongoing needs of homeowners

Sec. 2911 Funding for LIHEAP ($4.5B)

Sec. 2912 Funding for Water Assistance Program ($500 m)

Housing Provisions (subtitle B)Ratepayer Protection (subtitle K)

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Overview of the American Rescue Plan Act

Sec. 2001 Elementary and Secondary School Emergency Relief Fund (ESSER)•$122.7B Grants to State educational agencies.

Higher Education Emergency Relief Fund (Sec. 2003 )

•$39.6 billion to colleges and university and their students

Funding for E-Rate Support for Emergency Educational Connections

and Devices (Sec. 7402 )•$7.17 billion

Sec. 3401 Federal Transit Administration Grants ($30B)

Sec. 4005 Federal Emergency Management Agency (FEMA) ($50B)

Environment and Public Works ($11 billion): Title VI

•Sec. 6001 Economic Adjustment Assistance ($3B)

•Sec. 7102 Relief for Airports ($8B)

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Coronavirus State Fiscal Recovery Funds –Summary of key points

• States ($219.8B total): – $25.5B divided equally, $169B divided based on state’s share of unemployed

workers– Timing of payment: within 60 days of certification by the State or territory

(per pg. 580 of ARP)◊ Covered period starts March 3, 2021, funds available until December 31, 2024

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Coronavirus State Fiscal Recovery Funds –Summary of key points (cont’d)

• Use of funds (pg. 577-578 of ARP)– Responding to the public health emergency with respect to COVID-19 or its negative economic impacts,

including assistance to households, small businesses, and nonprofits, or aid to impacted industries (tourism, travel and hospitality)

– Premium pay to eligible workers of the State, territory or Tribal govt. ($13/hour, max $25k/worker), or by providing grants to eligible employers that have eligible workers who perform essential work

– For the provision of government services to the extent of the reduction of revenue is due to COVID-19 health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency

– For necessary investments in water, sewer or broadband infrastructure

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Coronavirus State Fiscal Recovery Funds –Summary of key points (cont’d)

• Use of funds (cont’d)– *CANNOT use to directly or indirectly offset reduction in net tax revenue

resulting from change in law/reg/admin. interpretation (i.e. no tax cuts and no delays in tax increases)

– Cannot be deposited into a pension fund

– *This is a hot topic and already a proposal is pending in the US Senate addressing the potential walking back of this state tax policy limitation. Stay tuned.

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LLPCoronavirus Local Fiscal Recovery Funds –

Summary of key points• Local governments ($130.2B total):

– Metropolitan cities: population greater than 50k, based on modified CDBG formula, direct from the Treasury

– Nonentitlement units of local government: population less than 50k, non-CDBG eligible, this money will come through States (no later than 30 days after the States receive). Also capped at 75% of most recent budget as of 1/27/20.

– Counties: based on population, direct from the Treasury – Timing: 1st amount within 60 days of enactment; 2nd amount one year later– Funds available until December 31, 2024

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LLPCoronavirus Local Fiscal Recovery Funds –

Summary of key points (cont’d)

– Use of funds (pg. 593 of ARP)◊ Responding to the public health emergency with respect to COVID-19 or its

negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries (tourism, travel and hospitality)

◊ Premium pay to eligible workers of the local govt. ($13/hour, max $25k/worker) or by providing grants to eligible employers that have eligible workers who perform essential work

◊ For the provision of government services to the extent of the reduction of revenue is due to COVID-19 health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency

◊ For necessary investments in water, sewer or broadband infrastructure◊ Cannot be deposited into a pension fund

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WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING©2021 CliftonLarsonAllen LLPInvestment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor

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Remi OmisorePrincipal: AssuranceRemi.Omisore@claconnect.com410-308-8157