Through the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) program, over $350 billion have been distributed by the Treasury to more than 30,000 entities. Because of the aggressive funding, many small, local governments have received far more funding than they ever have before which has triggered a single audit requirement. However, there is a way to avoid a single audit and pursue the alternative engagement option.
Normally, a Single Audit is required to any government entity that’s spends $750,000 or more in government financial aid during its fiscal year. These entities primarily consist of state, local, and tribal governments.
This funding was able to assist the communities in countless ways and eased their financial burden during a very scary time. However, now that the money has been spent, there are many small entities that now qualify for a single audit for possibly for the first time ever. A single audit can be intimidating to anyone, let alone an entity that is wildly unfamiliar with the process, and we are finding that some just aren’t prepared. There is good news, though.
Due to many of these entities lack of experience and resources, The U.S. Department of Treasury, the Office of Management and Budget (OMB), the AICPA Governmental Audit Quality Center (GAQC), and the National Association of State Auditors, Comptrollers, and Treasurers have come together to create an alternative action plan that might lighten the load for these entities. In order to avoid a single audit and pursue the alternative engagement option, a government will have to meet both of the following criteria:
By meeting both criteria above, there is the opportunity to save time, money and resources, which are all very precious, especially to small government entities. When these are met, the alternative engagement option will primarily focus on two narrowly scoped compliance requirements associated to allowed and not allowed activities, as well as allowable cost and/or cost principles. GAQC has already begun drawing up guidelines for auditors performing these alternative engagements. These can be found in the GAQC Practice Aid, which is designed to help auditors understand these new standards and requirements via the AICPA while also touching on the reporting standards and performance considerations.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.