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TC Single Audit Update 2020

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TC Single Audit Update 2020 6/17/20 Single Audit Update James Burke, Senior Accounting and Financial Management Advisor, Fiscal Management Section June 18, 2020 1 State and Local Government Finance Division Single Audit Update • CARES Act funding: Coronavirus Relief Fund and impact on Single Audits • 2020 State Compliance Supplements • 2018 revised Yellow Book • AICPA’s Interpretations on Independence • Recently issued SASs • SEFSA reporting issues • Proposed revisions to the Uniform Guidance • GREAT Act 2 State and Local Government Finance Division Coronavirus Aid, Relief, and Economic Security (CARES) Act • Establishes the Coronavirus Relief Fund (CRF) • Signed into law March 27, 2020 • US Dept. of Treasury (Treasury) website: https://home.treasury.gov/policy- issues/cares/state-and-local-governments • Two important documents on Treasury website: • Coronavirus Relief Fund, Guidance for State, Territorial, Local, and Tribal Governments (April 22, 2020) • Coronavirus Relief Fund, Frequently Asked Questions (updated May 28, 2020) 3 1 6/17/20 State and Local Government Finance Division State’s fiscal response to the COVID-19 • 2020 COVID-19 Recovery Act (S.L. 2020-4) appropriates CRF aid • NC Pandemic Recovery Office (NC PRO) is directly responsible for: • Coronavirus Relief Funds (21.019) • Education Stabilization Funds (84.425) • Important: FAQ for Funding distributed to County Governments (updated June 12, 2020) • Resources include: • Guide to Federal COVID-19 Funding for Local Governments • Fraud Hotline – report misuse of CRF • Website: https://www.nc.gov/agencies/ncpro • Contact: [email protected] 4 State and Local Government Finance Division US Dept. of Treasury: Coronavirus Relief Fund • Type of federal financial assistance – “Other financial assistance” under Uniform Guidance § 200.40 • CFDA: 21.019 (listed under https://beta.sam.gov/) • Subject to federal single audit requirements in Uniform Guidance, Subpart F. Subparts B, C, D w/exceptions, E are not applicable. Exceptions: Internal controls (§200.303) and subrecipient monitoring and management (§§200.330 to 332) • Procurement standards (Subpart D, §§200.317 to 326) are NOT applicable. • Local governments that receive payments from State or other local governments are considered subrecipients of the State or local government transferring the funds. 5 State and Local Government Finance Division Payments from Coronavirus Relief Fund • CARES Act provides that payments from the Fund may only be used to cover costs that are: • necessary due to the COVID-19 pandemic • based on reasonable judgment • not accounted for in the enacted budget as adopted for the fiscal year • incurred during the period March 1, 2020 to December 30, 2020 • money spent, checks issued, payments made • Local Governments must return CRF funds received but not used to cover costs incurred by December 30, 2020. 6 2 6/17/20 State and Local Government Finance Division Other 2020 COVID-19 Recovery Act Appropriations • Allocated to NC Dept. of Public Instruction for expenses incurred for school nutrition services, cybersecurity infrastructure, supplemental summer learning programs, and the facilitation of distance learning due to school closings. • https://www.dpi.nc.gov/districts-schools/district-operations/financial-and- business-services • Allocated to NC Dept. of Health and Human Services for expenses related to COVID-19 public health measures. • Additional funding, estimated at $1,235,859,000, expected to be received or already received for COVID-19 relief in existing federal programs (refer to S.L. 2020-4 sect. 4.1(b). 7 State and Local Government Finance Division Federal Programs funding with CARES Act funding OSMB (DPI?) Education Stabilization Funds - Governor’s 84.425 $95,600,000 Emergency Education Relief Fund Education Stabilization Funds - Elementary and 84.425 $396,300,000 secondary School Emergency Relief Fund NC Dept of Commerce Community Development Block Grant 14.228 $28,500,000 Dislocated Workers Grant Various $6,000,000 NC Dept of Public Safety, Coronavirus Emergency Supplemental Funding 16.034 ??? Governors Crime Commission Program (NEW) Byrne JAG Program 16.758 $15,400,000 NC Dept. of Transportation Formula Grants for Rural Area Program 20.507 $38,473,000 Urbanized Area Formula Program 20.509 $94,941,000 Airport Grants Various $2,765,000 NC Dept. of Agriculture and Emergency Food Assistance Program (TEFAP)- 93.568 $19,700,000 Consumer Services Commodities TEFAP-Administration 93.569 $8,200,000 8 State and Local Government Finance Division Federal Programs funding with CARES Act funding (cont.) NC Health and Human Services Child Care and Development Block Grant 93.575 $118,100,000 Low Income Home Energy Assistance Block Grant 93.568 $49,900,000 Community Services Block Grant 93.569 $25,900,000 Congregate and Home-Delivered Meals Various $22,200,000 Home Assistance/ESG State Various $18,400,000 WIC 10.557 $13,900,000 Supportive Services Various $6,200,000 Family Caregivers Various $3,100,000 Centers for Independent Living Various $2,200,000 Child Welfare Services 93.645 $1,600,000 Home Opportunities for Persons with AIDs 14.241 $1,200,000 Ryan White 93.917 $1,100,000 9 3 6/17/20 State and Local Government Finance Division Audit Deadline Extension • Staff of the LGC has extended the deadline for submitting audit reports with June 30, 2020 year end to January 31, 2021 (refer to LGC Staff blog, May 15, 2020). • OMB has allowed recipients and subrecipients who have not submitted their audit reports to the federal audit clearinghouse as of March 19, 2020 and that have fiscal years through June 30, 2020 an additional six months beyond the normal due date. • Recipients and subrecipients should maintain documentation for the reason for the delay in filing. • Delay in filing due to COVID-19 would still qualify for “low-risk auditee” under Uniform Guidance § 200.520(a). 10 State and Local Government Finance Division DHS Administrative Letter No. 01-20 • Medicaid/NC Health Choice procedures due to COVID-19, April 1, 2020. • Presidential issued proclamation due to COVID-19 outbreak. • Among the change in procedures: • Certification period extension • Recertifications – counties will not be responsible for conducting recertifications until further notice. • Case terminations not allowed, unless individual moves out of state, voluntary termination, or death • Counties are to focus on processing applications as quickly as possible. • https://policies.ncdhhs.gov/divisional/health-benefits-nc-medicaid/adult- medicaid/administrative-letters/2020 11 State and Local Government Finance Division 2020 State Compliance Supplement • State Compliance Supplements have been updated for 2020, sections B through E. • OMB 2020 Compliance Supplement (Section A) schedule to be released late June. There may be an addendum in the fall. • COVID-19 relief and the 2020 State Compliance Supplements document • NC DHHS DHB’s Administrative Letter No. 01-20 Addendum 1, Medicaid/NCAC Procedures for COVID-19, dated April 1, 2020 • Local CPA Firms-COVID-19 memo – May 4, 2020 • Status of population data for samples for Medicaid 12 4 6/17/20 State and Local Government Finance Division COVID-19 and 2020 State Compliance Supplement • State agencies have not incorporated guidance on testing programs with COVID-19 relief funds, but auditors are encouraged to wait for guidance from granting agencies in the 2020 OMB Compliance Supplement. • Guidance for Coronavirus Relief Fund (21.019) at US Treasury and NC PRO or https://beta.sam.gov/. • State agencies may issue new State supplements or revised current supplements (dates on individual supplements to change). • If no Federal or State program exists, auditor may refer to OMB Compliance Supplement Part 7, “Guidance for Auditing Programs not Included in this Compliance Supplement.” 13 State and Local Government Finance Division Challenges in preparing State Compliance Supplement • Incorporating the “Pick 6” initiative in the State Matrix for Federal Programs • Aligning the accounting of state funding with the State programs • Federal programs are identified with CFDA numbers. • Activities are often identified as State programs and do not tie to State Compliance Supplement. Certain type of compliance requirements identified should not be tested at local level • Guidance on testing internal control over compliance • Auditors should use a framework, such as Part 5 of the OMB Compliance Supplement 14 State and Local Government Finance Division 2018 Yellow Book Standards • Effective for periods ending June 30, 2020 (no extension) • Three categories of nonaudit services • Services that impair independence if performed by auditor (¶3.87) (no changes from the 2011 Yellow Book standards) • New: A service that is a significant threat to independence (¶3.88) Preparing financial statements in their entirety (elevated from a threat in the 2011 YB standards) • Threats to independence (¶3.89) Added: preparing certain line items or sections of the financial statements Removed: proposing standard, adjusting, correcting JEs accepted by management • Important: Auditor’s professional judgement and documentation 15 5 6/17/20 State and Local Government Finance Division 2018 Yellow Book Standards (cont.) • Auditors should apply the conceptual framework to mitigate threats to independence (¶3.26) • Identify and evaluate threats, apply safeguards • Examples of actions that could be safeguards, in certain circumstances (¶3.69) a) Do not include individuals who provided services as audit team member b) Have another auditor, not associated
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