July 10, 2020

By Tricia Katebini, CPA, MBA, Audit Senior Manager

In a previous industry alert, OMB Offers Relief for Recipients of Federal Financial Assistance Directly Impacted by COVID-19, GRF reported that OMB was granting flexibility related to the use of Federal funding for the allowability of salaries and other project activities, along with extensions of Single Audit submissions. The previous Single Audit reporting package submission deadline for filers with year-ends through June 30, 2020 was for six months. As the United States moves into new stages of reopening in the COVID-19 pandemic, OMB issued Memorandum 20-26, which rescinds the extensions.

Revised Extensions of Upcoming Deadlines

  • Extensions are currently allowed up to six months beyond the normal due date to complete and submit the Single Audit package for recipients with fiscal-year ends through September 30, 2019.
  • Extensions are currently allowed up to three months beyond the normal due date to complete and submit the Single Audit package for recipients with fiscal-year ends through December 31, 2019.
  • Extensions are no longer allowed for filers with 2020 year-ends as extensions were rescinded with the new Memo.
  • Recipients are still not required to seek approval for the extension but should maintain documentation for the reason delaying filing (for example, what the loss of operations are and how the award is affected). Recipients taking advantage of the extensions will still qualify as a low-risk auditee under the criteria set forth under §200.520(a).

Cost Allowability

While the rescission of the Single Audit reporting deadlines may come as a bit of surprise, OMB states that “during the Coronavirus pandemic, many recipients learned the capabilities and are now getting the experience to perform the objectives of the Federal programs remotely with limited access to their physical office. However, due to the uncertainty of the re-opening phase and the speed of the ramp-up effort, this memorandum provides an extension of the [allowability of salaries and other project activities]”. Accordingly, awarding agencies may allow recipients to continue to charge salaries and benefits to active Federal awards under unexpected or extraordinary circumstances from all funding sources, Federal and non-Federal. Further details on this can be found in our previously issued industry alert.

Additionally, awarding agencies may allow other costs to be charged to Federal awards necessary to resume activities supported by the award, consistent with applicable Federal cost principles and the benefit to the project.

The flexibilities for cost allowability within M-20-26 are currently set to expire on September 30, 2020.

Other Updates from OMB

Along with Single Audit reporting package submission deadline updates, OMB also provided the following updates for recipients of Federal funds:

  1. Clarification that no “double-dipping” is allowed. In other words, organizations that have received funding for payroll costs through the Paycheck Protection Program must be cognizant that they are also not charging the Federal government through their Federal awards, which would result in the Federal government paying for the same expenditures twice.
  2. Organizations must exhaust other funding sources first to sustain their workforce. The Memorandum states that other funding sources must be exhausted first, and they should implement the steps necessary to save overall operational costs to preserve Federal funds for the ramp-up effort as project activities begin again. There have been many questions surrounding this “clarification” and we expect to have more guidance as awarding agencies adopt M-20-26. Once we have additional information, this industry alert will be updated accordingly.
  3. COVID-19 Emergency Acts funding and programs must be identified separately on the Schedule of Expenditures of Federal Awards and in audit report findings. More details should be released about this requirement when the 2020 OMB Compliance Supplement is issued, which is expected early this summer or within the addendum in early fall.

Next Steps

Recipients should read the full memo (M-20-26). Although the OMB is encouraging agencies to allow these exceptions, keep in mind that like other previous Memos issued, this is not a government-wide directive. Recipients should contact agencies for specifics related to their Federal projects.

The CPAs and advisors at GRF are available to assist clients and we will continue to provide updates on the firm’s COVID-19 Response page as they develop. For questions about the Memo and Federal awards, contact Tricia Katebini, CPA, MBA, Audit Senior Manager, at tkatebini@grfcpa.com or 301-951-9090.