You applied for and received a Shuttered Venue Operators Grant (SVOG). Now that it’s time for an audit of those funds, how can you prepare?
There are a number of factors to consider when preparing for your audit or compliance examination. As a reminder, if you received SVOG funding of less than $750,000, no audit is required. If you received or spent more than $750,000 of SVOG funds in 2021 or 2022, you may be required to complete one of the SBA audit requirements.
Audit and Compliance Examination Requirements
The SBA has specific audit requirements for this grant, as it applies to for-profit businesses that do not qualify for federal awards under normal circumstances. For for-profit entities, the audit threshold for this grant is tied to your revenue recognition policies. Award recipients that use the accrual basis of accounting will recognize revenue based on incurred allowable expenditures for the grant. Award recipients that use the cash basis of accounting must recognize revenue when received in cash – and in these cases, it is capped by the amount of allowable cash expenditures incurred during a fiscal year while/after the funding was granted.
There are varying levels of audits you can have performed based on your organization and SVOG spending. During this process, your auditor will assist you in determining which of the following audits to conduct. For companies without an annual financial statement audit, typically the compliance examination will be the most efficient and cost effective.
- A compliance examination engagement
- An audit of the entity’s financial statements
- A single audit conducted in accordance with 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
- A program-specific audit conducted in accordance with 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
How Do I Prepare for My Audit or Compliance Examination?
The first step is to select a qualified accounting firm to complete the audit. Compliance examinations are performed under different professional standards than regular financial or single/program-specific audits. Because these are required to be performed under Government Auditing Standards, not all CPA firms are qualified (or willing) to perform them. Choose a partner with a team of SVOG audit specialists to ensure you meet compliance requirements in this audit process.
As you spent your grant, you were more than likely tracking these expenses (if you did not complete this step, be sure to review your past spendings and collect this information in a single spreadsheet or document). Expense tracking should be at the lowest level of detail and include identifiable information, such as invoice numbers, payroll dates, invoice dates and amounts. This is the information your auditor will review for compliance and will select from for their testing.
After you have gathered your list of SVOG expenses, ensure your supporting documentation is complete. Verify that the information on the invoices or payroll registers agree with the details on your list of expenses.
What Will My Auditor Look For?
In a compliance examination, your auditor will test the following three compliance requirements that are derived from the Office of Management and Budget (OMB) Compliance Supplement:
- Activities allowed or unallowed
- Allowable costs and cost principles
- Period of performance
As part of the audit or compliance examination, your auditor will learn the design of relevant portions of internal control over compliance. They will speak with your company’s management, supervisors and staff personnel, as appropriate. The auditor may also request and inspect significant organizational and SVOG-related documents, which can include partnership agreements, articles of incorporation and other relevant documents, and will observe your company’s activities and operations.
Your auditor will use this time to review and test a sample of your SVOG expenditures to determine if your business used SVOG funds for allowable activities under the Uniform Guidance (as modified by the SVOG FAQs and SVOG Post-Award FAQs). You will likely be required to provide sufficient supporting documentation for your expenses. This can include invoices, check stubs, bank statements, payroll registers/stubs and other documentation as requested. If you received Paycheck Protection Program (PPP) funds, your auditor will review those expenses as well to ensure that your company did not include the same expense for both PPP and SVOG.
Your auditor can help you to properly allocate expenses to minimize the audit burden and maximize the use of other federal programs, such as the Employee Retention Credit (read about if you qualify for untapped refunds here).
Sikich’s team of professionals has firsthand, in-depth experience with auditing entertainment and for-profit businesses. To talk to our team or to receive a quote, please contact us below:
