The Shuttered Venue Operators Grant (SVOG) was provided to eligible for-profit entertainment businesses for COVID-19 relief. The federal grant – equaling more than $16 billion – aids entertainment businesses in covering eligible expenses, such as payroll costs, rent, utilities, administrative costs and more (for the full list of allowable fund uses, please visit the SBA site).
Organizations that received the initial phase were able to spend award funds over a 12-month period between March 1, 2020 and December 31, 2021. Recipients of both the initial and supplemental phases were able to spend award funds over an 18-month period between March 1, 2020 and December 31, 2021.
For many for-profit businesses, this may be the first time you are subject to compliance examination or audit requirements.
Do I Need an Audit or Compliance Examination?
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. Because the SVOG funds were not received until 2021, all expenses allocated to 2020 will be combined with 2021 to determine if you meet the $750,000 threshold. One of the following options must be used to meet the SBA audit requirements if the audit threshold is reached:
- 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
If your company already had an annual audit of your financial statements performed, simply submit those audited financial statements, and you are done! For those that didn’t already have an audit conducted, option 1, a compliance examination engagement, will be the most cost effective and best solution.
What is a Compliance Examination and How do I Get One?
The compliance examination option was introduced by the SBA for the SVOG to reduce the burden of a single audit or program-specific audit and is focused on compliance with specific grant requirements. Compliance examinations are performed under different professional standards than regular financial or single/program-specific audits.
Compliance examinations (and the other three audit options) must be retained and are completed by an external accounting firm. The SBA will not perform these audits or appoint/hire an auditor for you. Because these audits are required to be performed under Government Auditing Standards, not all CPA firms are qualified (or willing) to perform them.
When is My Audit Due?
Audits must be completed and submitted within the later of nine months after your company’s fiscal year-end or April 22, 2023. Keep in mind that if you spent over $750,000 in 2022, you may need to submit two audits: one for 2021 and another for 2022.
Even though you aren’t required to submit the audits immediately, it is important to retain and schedule your audit sooner rather than later. 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).
What Should I Do Next?
- Talk to your existing accountant about your options and their qualifications and availability to perform these audits
- Evaluate if you qualify for other federal programs, such as the Employee Retention Tax Credit – failing to consider all federal programs may cause you to leave money on the table
- Begin accumulating and organizing your SVOG support – receiving federal funding is quite unique and is subject to higher levels of compliance and scrutiny
- Retain and schedule your SVOG audit or compliance examination – ensure your auditor is fluent in compliance examinations and the SVOG requirements
Sikich’s team of professionals performs countless Compliance Examinations, Financial Audits, Single Audits, and Program-Specific Audits each year and has firsthand, in-depth experience with entertainment and for-profit businesses.
Are you a member of a CPA firm that doesn’t perform these audits? We would love to help you and your clients with these requirements. Please reach out to learn how we can add value to your SVOG clients.
To talk to our team or to receive a quote, please contact us below: