By Adelina Burke, CPA
(From materials supplied by the AICPA)

The COVID-19 pandemic resulted in widespread economic devastation as a result of health and safety protocols. To relieve impacted business, the U.S. government provided historic levels of federal funding. The responses, including the CARES Act and the American Rescue Plan Act of 2021, provided billions of dollars to businesses, state and local governments, and not-for-profits. While the funding provided much-needed relief, the assistance comes with added complications for many.

Much of the pandemic funding is subject to single audit rules. Not all recipients of this funding will need a single audit, but when a nonfederal entity spends $750,000 or more of federal awards in a fiscal year, a single audit is required.

Many recipients of pandemic funding have never had a single audit before, so they may not know what is required. Below are some tips for you to help your clients through the single audit process.

PICPA Technical Reviewer Adelina Burke discusses single audits in this video.

Ask Clients about the Funding They Received

Talk to your clients about the types of funding they received since the beginning of the pandemic in 2020 to the present. In some cases, you may consider helping them review their grant agreements to identify what is needed on their end, and then on your end as the auditor. Additionally, you could email clients with news related to the funding they’ve received or update your website with the most current information. The sooner clients know about important and relevant information, the better prepared they are and the better audit you can perform.

Encourage clients to be proactive and ask questions about the funding they’ve received. For example, one controller contacted her CPA as soon as she knew her organization would receive funding. She knew the funding had stipulations, but didn’t know yet that a single audit would be required. Finding out early in the process was a huge benefit.

This is a time when having excellent lines of communication with your clients is especially important. Learning whether or not your clients reviewed — and truly understand — the guidelines for the type of funding they received is key, as well as whether or not they have procedures in place to comply.

Also, clients need to know — even if they are under the $750,000 threshold — that administrative and other requirements of federal funding still apply, even if a single audit is not needed. Some funds may only be spent for certain purposes, and this is an important concept clients must understand.

Be Aware of Audit Quality Concerns

As auditors, you have a duty to the public to perform high-quality audits. And single audits have a significant public interest component because they involve taxpayer dollars and federal agencies rely on them as part of their administrative responsibilities for determining compliance with the requirements of federal awards.

Because of the complexity of single audits and the necessity of specialized knowledge of their rules and compliance requirements, you should carefully consider whether you should accept a single audit engagement if you do not have experience performing them. Perhaps you could consider performing 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 only have limited experience, you could consider engaging another firm to perform a pre-issuance review or other type of consultative assistance to help ensure a high-quality audit. You can use the PICPA Peer Review Directory or AICPA’s Peer Reviewer Search to find an auditor to which to refer your clients or to look for consultative assistance. The AICPA’s Governmental Audit Quality Center (GAQC) has a listing of its member firms with contact information on its Find A Member page.

Continuing Education and New Developments

Firms should ensure auditors receive the required training for all specialization areas. For example, generally accepted government auditing standards (the Yellow Book) require auditors who perform single audits to maintain their competency through CPE hours and topics listed in the 2018 Yellow Book.

If you take on a single audit, there is single audit learning to help you gain the fundamental knowledge you need. Regarding COVID-19 funding, you may want to pay close attention to any training provided by federal agencies.

Single Audit Training

• Webinars, webcasts, and self-study sessions
• Earn a single audit certificate

The AICPA’s GAQC website, in particular its COVID-19 Resource page, outlines many resources. You may also want to contact other firms on their single audit and pandemic-related resources. It’s useful to speak to your peers about what they’re doing and learn from their experiences. Keeping on top of things is important.

Looking Ahead

The pandemic has drastically changed work in many industries, and the accounting profession is no different. The next few years will see many more single audits being performed by more public accounting firms across the country.

These are challenging times in the single audit arena for sure. But the tips above should help provide a pathway to success.

Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.