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). Qualifying organizations could receive extremely beneficial grants of 45% of gross earned revenue with a cap of $10 million.
While this grant came at a time when the entertainment industry was suffering, certain federal audit rules still apply. Organizations that receive grant funding, more typically relevant in the not-for-profit industry, are required to complete a specialized audit on the use of those funds. Businesses that spent SVOG in excess of $750,000 in a fiscal year are now subject to the Single Audit requirements.
For many for-profit entertainment businesses, this will be the first time you are subject to this audit. Failure to comply with the audit requirements may result in the SBA requiring the funds to be returned.
Where to start
A Single Audit is essentially an audit of the appropriate use of the SVOG. As the majority of for-profit businesses have never had to complete a Single Audit, it’s normal to be confused or unsure of the next steps. To prepare for the expectations of this audit, it’s important to gather documentation of all SVOG expenditures. Your auditor will analyze the documentation to ensure you’ve used the funding appropriately.
Make sure you find an audit service provider you can trust to support you in performing the audit requirements for the first time. With a professional’s help, you can meet these new requirements with ease and efficiency. Start with your existing CPA relationship to see if they have the appropriate expertise (your auditors must perform this audit in accordance with the Generally Accepted Government Auditing Standards, which is a specialized focus that not all audit firms may be able to perform). Recipients of the grant typically have nine months after obtaining the funds to fulfill the audit requirements, and this is not something you want to postpone.
The Single Audit requirements only apply if you have spent more than $750,000 in federal funding during your fiscal year. If you plan to reach the $750,000 threshold but have not during your fiscal year, you may not be subject to the audit requirements this year, and rather, the following year. However, it is important to keep in mind that the SVOG only allows funds to be spent until December 31, 2021, or June 30, 2022 if you received the Supplemental Phase SVOG funds.
Sikich’s team of professionals performs countless Single Audits each year and has firsthand, in-depth experience with entertainment and for-profit businesses. To talk to our team, please contact us below.